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The Greek great depression:a general equilibrium study of its drivers

Author

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  • George Economides

    (Athens University of Economics and Business)

  • Dimitris Papageorgiou

    (Bank of Greece)

  • Apostolis Philippopoulos

    (Athens University of Economics and Business)

Abstract

This paper provides a quantitative study of the main determinants of the Greek great depression since 2010. We use a medium-scale DSGE model calibrated to the Greek economy between 2000 and 2009 (the euphoria years that followed the adoption of the euro). Then, departing from 2010, our simulations show that the fiscal policy mix adopted, jointly with the deterioration in institutional quality and, specifically, in the degree of protection of property rights, can explain essentially all the total loss in GDP between 2010 and 2015 (around 26%). In particular, the fiscal policy mix accounts for 14% of the total output loss, while the deterioration in property rights accounts for another 8%. It thus naturally follows that a less distorting fiscal policy mix and a stronger protection of property rights are necessary conditions for economic recovery in this country.

Suggested Citation

  • George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos, 2017. "The Greek great depression:a general equilibrium study of its drivers," Working Papers 234, Bank of Greece.
    • Handle: RePEc:bog:wpaper:234
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    Cited by:

    1. McQuinn, Kieran & Varthalitis, Petros, 2018. "How openness to trade rescued the Irish economy," Papers WP608, Economic and Social Research Institute (ESRI).
    2. Gabriel Chodorow-Reich & Loukas Karabarbounis & Rohan Kekre, 2023. "The Macroeconomics of the Greek Depression," American Economic Review, American Economic Association, vol. 113(9), pages 2411-2457, September.
    3. Juselius, Katarina & Dimelis, Sophia, 2019. "The Greek crisis: A story of self-reinforcing feedback mechanisms," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-22.
    4. George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos, 2020. "Macroeconomic policy lessons for Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 152, Hellenic Observatory, LSE.
    5. George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos, 2020. "Macroeconomic Policy Lessons for Greece from the Debt Crisis," CESifo Working Paper Series 8188, CESifo.
    6. Stelios Sakkas & Petros Varthalitis, 2021. "Public Debt Consolidation and its Distributional Effects," Manchester School, University of Manchester, vol. 89(S1), pages 131-174, September.
    7. Dimitris Papageorgiou & Stylianos Tsiaras, 2021. "The Greek Great Depression from a neoclassical perspective," Working Papers 286, Bank of Greece.
    8. Varthalitis, Petros, 2019. "FIR-GEM: A SOE-DSGE Model for fiscal policy analysis in Ireland," Papers WP620, Economic and Social Research Institute (ESRI).
    9. Dimitris Malliaropulos & Dimitris Papageorgiou & Melina Vasardani & Evangelia Vourvachaki, 2021. "The impact of the Recovery and Resilience Facility on the Greek economy," Economic Bulletin, Bank of Greece, issue 53, pages 7-28, July.
    10. Sakkas, Stelios & Varthalitis, Petros, 2018. "The (intertemporal) equity-efficiency trade-off of fiscal consolidation," MPRA Paper 90983, University Library of Munich, Germany.
    11. George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos, 2021. "Austerity, Assistance and Institutions: Lessons from the Greek Sovereign Debt Crisis," Open Economies Review, Springer, vol. 32(3), pages 435-478, July.
    12. Ngozi E. Egbuna (PhD) & Maimuna John-Sowe & Dauda Mohammed (PhD) & Hissan Abubakari & Eric L. Sambolah & Kormay Adams, 2020. "Uncertainty And Economic Performance In The West African Monetary Zone (Wamz): A Fixed Effect Panel Threshold Approach," Working Papers 19, West African Monetary Institute.

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    More about this item

    Keywords

    Growth; public debt; institutions;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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