The Twin Deficits, Monetary Instability and Debt Crises in the History of Modern Greece

George Alogoskoufis

GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe from Hellenic Observatory, LSE

Abstract: This paper reviews, analyses and interprets the determinants and the implications of the twin, fiscal and current account, deficits in the history of modern Greece. The analysis focuses on the determinants and the dynamic interactions among the twin deficits, domestic monetary regimes, and access to international borrowing. Two are the main conclusions: First, when Greece did not have access to international borrowing, fiscal imbalances usually led to monetary destabilization and inflation. Second, when it did have access to international borrowing, fiscal imbalances were generally larger, led to external deficits and, eventually, sovereign debt crises and defaults. The monetary and exchange rate regime also mattered. The 1950s and 1960s were the only prolonged period in which the twin deficits were tackled effectively and, as a result, the only period in which Greece enjoyed high economic growth, monetary stability, and external balance simultaneously.

Keywords: Modern Greece; economic history; institutions; fiscal policy; monetary policy; debt crises (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-cba, nep-ger, nep-his, nep-mon and nep-opm
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Citations: View citations in EconPapers (5)

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Working Paper: The twin deficits, monetary instability and debt crises in the history of modern Greece (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hel:greese:189

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