An assessment of the impacts of inflation on Greek public finances: macroeconomic effects and policy implications

Sofia Lazaretou () and Georgios Palaiodimos ()
Additional contact information
Sofia Lazaretou: Bank of Greece

Economic Bulletin, 2023, issue 57, 7-24

Abstract: In 2022, the global cost of living surged, pushing already rising global inflation to multi-decade highs. Our empirical analysis assesses the impact of high inflation on Greece’s public finances (in terms of flows), considering the extraordinary economic circumstances arising from the pandemic crisis and the initial phase of the recent energy crisis. To this end, we use a small-scale Bayesian vector autoregressive model for the Greek economy to quantify the effects of an adverse price shock on the primary balance, tax revenue and primary spending (all normalised by nominal GDP), as well as on real output, distinguishing between the effects of a demand- and an external supply-driven shock to inflation. We find that the nature of an inflation shock, i.e. whether it is demand- or supply-driven, is important for correctly identifying the short-to-medium-term effects of inflation shocks on fiscal outcomes.

Keywords: price inflation; public finances; COVID-19 pandemic; energy crisis; Greece; Bayesian Structural VAR (search for similar items in EconPapers)
JEL-codes: C11 E3 H5 H6 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.52903/econbull20235701 (application/pdf)

Related works:
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:bog:econbl:y:2023:i:57:p:7-24

Access Statistics for this article

Economic Bulletin is currently edited by Dimitris Malliaropulos

More articles in Economic Bulletin from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().