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A macroeconomic simulation for Greece in the wake of its government debt crisis

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  • Thomas A. Alexopoulos

    (University of Peloponnese)

  • Henry Thompson

    (Auburn University)

Abstract

This paper simulates the macroeconomics of Greece following its 2009 government debt crisis that precipitated a 4-year depression with stagnant growth since. A model of aggregate supply and demand estimated with quarterly data from 2003 to 2018 is constrained to a balanced government budget, outside euro exchange rate, and exogenous international interest rate. Dynamic stochastic simulations starting in 2011 capture the effects of less erratic government spending, quicker transition to debit cards, and returning investment sentiment to the pre-crisis level. Simulations track the path of income along with the trade balance, tax revenue, price level, and equilibrium quantity of money.

Suggested Citation

  • Thomas A. Alexopoulos & Henry Thompson, 2021. "A macroeconomic simulation for Greece in the wake of its government debt crisis," Economic Change and Restructuring, Springer, vol. 54(3), pages 699-716, August.
    • Handle: RePEc:kap:ecopln:v:54:y:2021:i:3:d:10.1007_s10644-019-09263-7
    DOI: 10.1007/s10644-019-09263-7
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