Fiscal Imbalances and Exchange Rate Management: Greece on the Track of EMU

G.D. Demopoulos, Panayotis Th. Kapopoulos and E.K. Fratzeskos

Athens University of Economics and Business from Athens University of Economics and Business, Department of International and European Economic Studies

Abstract: Measured against PPP, the drachma effective exchange rate was overvalued by a significant amount, implying that the devaluation on March 1998 was an adjustment of the exchange rate towards the long-run price differentials. The paper also analyses the links between fiscal policy, interest rates and the real exchange rate in Greece and attempts to empirically measure the forces that push the exchange rate toward real appreciation.

Keywords: FINANCIAL POLICY; FISCAL POLICY (search for similar items in EconPapers)
JEL-codes: F41 H30 E62 (search for similar items in EconPapers)
Date: 1998

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