An Empirical Analysis of a Reaction-Function Approach to Policymaking in Greece during 1975-1993

Nicholas Apergis () and Gerasimos Soldatos

European Research Studies Journal, 1998, vol. I, issue 3, 51-69

Abstract: This paper examines the extent to which the policy instruments of money supply and budget deficit were endoigenous in Greece over the period 1975-1993. It is assumed that the policymaker's objectives are the growth rate of GNP and the balance of payments. The so-called "reaction-function approach" to the interdependence of economy and policy is utilised for this purpose. The empirical analysis is made in terms of a maximum likelihood methodology that reconciles co integration with optimal control techniques. It suggests that only the money-supply instrument has been endogenous in an effort to promote growth and prevent balance-of-trade deterioration.

Keywords: Policy Endogeneity; Reaction-Function Approach; Optimal Control; Co integration (search for similar items in EconPapers)
JEL-codes: C59 E52 E65 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ers:journl:v:i:y:1998:i:3:p:51-69

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