Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal

Pedro Bação and António Portugal Duarte

Chapter 4 in Serbia and the European Union: Economic Lessons from the New Member States, 2011, vol. 1, pp 61-76 from Institute of Economic Sciences

Abstract: The increase in both public and private indebtedness has been one of the main macroeconomic developments in recent years. This trend has been accompanied by large current account deficits, especially in smaller countries, such as Greece and Portugal. One possible explanation for this behaviour is the reduction in interest rates that convergence to the European single currency produced. At the same time as interest rates declined, these countries experienced a strong increase in domestic demand and a real exchange rate appreciation. Adoption of the euro implied that the appreciation of the real exchange rate could not be compensated by means of nominal devaluations, resulting in reduced competitiveness. In this paper we study the macroeconomic performance of Greece and Portugal during the process of convergence to the single currency and their prospects, in the light of the current financial crisis. To this end we make use of a consumption model developed by Gabriel Fagan and Vítor Gaspar. The experience of these two countries may give important lessons for candidate countries.

Keywords: Consumption; euro; interest rates; indebtedness; exchange rates (search for similar items in EconPapers)
Date: 2011
ISBN: 978-971-9344-03-9
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.ien.bg.ac.rs/images/stories/download/serbiaeu_ch4.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ien.bg.ac.rs/images/stories/download/serbiaeu_ch4.pdf [301 Moved Permanently]--> http://ien.bg.ac.rs/images/stories/download/serbiaeu_ch4.pdf)

Related works:
Working Paper: Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal (2011)
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:ibg:chaptr:srbeu-4

Access Statistics for this chapter

More chapters in Book Chapters from Institute of Economic Sciences 12 Zmaj Jovina St, 11000 Belgrade, Serbia. Contact information at EDIRC.
Bibliographic data for series maintained by Zorica Bozic ().