The impact of economic uncertainty and inflation uncertainty on the Greek economy

Hiona Balfoussia and Dimitrios Louzis

Economic Bulletin, 2021, issue 53, 49-68

Abstract: This study provides estimates of economic uncertainty and inflation uncertainty for the Greek economy and considers their time-varying impact on the corresponding macroeconomic variables, i.e. GDP growth and inflation. The authors find that, in both cases, the degree of uncertainty varies over time. Its impact on the underlying variables also fluctuates and is statistically significant and negative during both the global financial crisis and the Greek sovereign debt crisis, as well as during the COVID-19 pandemic. Thus, during these periods, uncertainty weighs on the economy’s fundamentals. The findings of the study have a number of policy implications, including that the extraordinary policy measures taken to contain the economic impact of the COVID-19 pandemic should be withdrawn gradually and with due caution, as any increase in uncertainty may have an adverse effect on economic activity and a deflationary impact on prices.

Keywords: stochastic volatility; time-varying parameters; financial crisis; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: C11 C22 E31 E32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:bog:econbl:y:2021:i:53:p:49-68

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