What was the Role of Monetary Policy in the Greek Financial Crisis?

Edward Seyler and John Levendis
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Edward Seyler: Louisiana State University
John Levendis: Loyola University New Orleans

South-Eastern Europe Journal of Economics, 2013, vol. 11, issue 2, 117-137

Abstract: To what extent is Greece's current economic crisis the result of monetary policy misalignment between the European Central Bank and Greece? We use a risk adjusted Taylor Rule to examine Greece's monetary policy from 1993 to the present. We argue that the monetary policy of the Bank of Greece satisfies several criteria for a good monetary policy. The monetary policy of the ECB, on the other hand, exhibits characteristics that suggest it had a destabilizing effect on the economy of Greece. That is, whereas the ECB could have balanced excessive fiscal stimulus with a contractionary monetary policy, the ECB’s actual expansionary monetary policy may have reinforced the fiscal stimulus and led to further destabilization.

Keywords: Greece; Monetary Policy; Bank of Greece (search for similar items in EconPapers)
JEL-codes: E00 E50 E58 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:seb:journl:v:11:y:2013:i:2:p:117-137

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