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An Economic Business Cycles Model with Credit Constraints: The Case of Greece

Ioannis Kaskarelis and Erotokritos Varelas
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Ioannis Kaskarelis: University of Macedonia, Department of Economicsmics, Postal: 156 Egnatia Street, GR-540 06 Thessaloniki, Greece ,,

Economia Internazionale / International Economics, 1996, vol. 49, issue 4, 561-583

Abstract: A multiplier/accelerator macroeconomic model incorporating the permanent income hypothesis in private consumption, financial constraints in private investment, and a government that attempts fiscal expansions with tight money, is examined. Stability conditions show that government actions could be destabilizing if consumption patterns are closer to the Keynesian archetype than to the permanent income hypothesis. Simulation exercises show that during the period 1973-90 Greece was closer to the PIH with high marginal propensity to consume and low coefficient of acceleration with respect to aggregate private investment activities.

Date: 1996
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