Consumption-smoothing and the excessiveness of Greece's current account deficits

Stelios Makrydakis ()
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Stelios Makrydakis: European Central Bank, Postfach 160319, D-60066 Frankfurt am Main, Germany

Empirical Economics, 1999, vol. 24, issue 2, 183-209

Abstract: This paper investigates whether the sequence of current account deficits experienced in Greece over the 1950-1995 period have been excessive. The degree of excessiveness is gauged by comparing the actual current account series to an optimal current account measure derived from an intertemporal model of current account determination. The findings indicate that optimal consumption smoothing did not take place over the sample period suggesting that the existing restrictions to the free flow of capital were binding. More importantly the stock of net foreign liabilities was found to have been set on an unsustainable path following the 1989/90 balance of payments crisis yet there is clear evidence that this tendency has been gradually reversed during the last couple of years.

Keywords: Present; value; model; ·; excessive; current; account; deficits (search for similar items in EconPapers)
JEL-codes: F32 F47 (search for similar items in EconPapers)
Date: 1999-05-11
Note: received: October 1996/Final version received: November 1997
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Citations: View citations in EconPapers (13)

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