The Analytics of the Greek Crisis

Dimitri Vayanos, Pierre-Olivier Gourinchas and Thomas Philippon ()

No 11334, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide an empirical and theoretical analysis of the Greek Crisis of 2010. We first benchmark the crisis against all episodes of sudden stops, sovereign debt crises, and lending boom/busts in emerging and advanced economies since 1980. The decline in Greece's output, especially investment, is deeper and more persistent than in almost any crisis on record over that period. We then propose a stylized macro-finance model to understand what happened. We find that a severe macroeconomic adjustment was inevitable given the size of the fiscal imbalance; yet a sizable share of the crisis was also the consequence of the sudden stop that started in late 2009. Our model suggests that the size of the initial macro/financial imbalances can account for much of the depth of the crisis. When we simulate an emerging market sudden stop with initial debt levels (government, private, and external) of an advanced economy, we obtain a Greek crisis. Finally, in recent years, the lack of recovery appears driven by elevated levels of non-performing loans and strong price rigidities in product markets.

Keywords: Greek crisis; Dsge model; Sovereign default; Sudden stop; Bank-sovereign loop; Fiscal contraction; Price rigidities (search for similar items in EconPapers)
JEL-codes: E2 E3 E5 E6 F3 F4 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-eec, nep-mac, nep-net and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Downloads: (external link)
https://cepr.org/publications/DP11334 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Analytics of the Greek Crisis (2017)
Working Paper: The Analytics of the Greek Crisis (2017)
Working Paper: The analytics of the Greek crisis (2017)
Chapter: The Analytics of the Greek Crisis (2016)
Working Paper: The Analytics of the Greek Crisis (2016)
Working Paper: The Analytics of the Greek Crisis (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11334

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11334

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().