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

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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.

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Authors and Affiliations

  1. Department of Economics, University of Peloponnese, Tripolis, Greece

    Thomas A. Alexopoulos

  2. Department of Economics, Auburn University, Auburn, USA

    Henry Thompson

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  1. Thomas A. Alexopoulos
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  2. Henry Thompson
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Correspondence to Thomas A. Alexopoulos.

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Alexopoulos, T.A., Thompson, H. A macroeconomic simulation for Greece in the wake of its government debt crisis. Econ Change Restruct 54, 699–716 (2021). https://doi.org/10.1007/s10644-019-09263-7

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