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An income determination model for Greece in the Euro Zone

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  • Henry Thompson

Abstract

This paper modifies the income determination model to focus on two viable policies that would raise income in Greece with the government facing sizeable interest and debt payments. The usual macroeconomic policy options are unavailable in the Euro Zone with the balanced budget constraint, outside currency and fixed interest rate. On the monetary side, banking policy reform would eliminate bank account restrictions and mandatory purchase of government bonds. On the real side, investment policy reform would streamline the rent seeking bureaucracy. Together these policy reforms lead to income overshooting with a transitory trade surplus raising the money supply.

Suggested Citation

  • Henry Thompson, 2021. "An income determination model for Greece in the Euro Zone," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 664-673, December.
    • Handle: RePEc:bla:ausecp:v:60:y:2021:i:4:p:664-673
    DOI: 10.1111/1467-8454.12224
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    References listed on IDEAS

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