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Assessing the Effectiveness of the Exchange Rate Movements on the Greek Current Account Deficit: A Cointegration Analysis

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  • John Paleologos
  • Grigorios Bitzis
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    Abstract

    Using the Johansen Cointegration analysis, Error Correction Modeling (ECM) and Granger Causality on annual data over the 1963 – 2003 period, it is shown that there is a long and short run relationship between the Greek current account deficit and the real effective exchange rate of the Greek currency with the currencies of European Union (EU-15) countries, which are partners of Greece in EU-15. The empirical evidence reveals one – way causality from current account deficit to GDP, RER, GDP11, M3 and BD. The specification and diagnostic tests yield satisfactory results, indicating that the ECM estimates are consistent with the empirical framework.

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    Bibliographic Info

    Article provided by European Research Studies Journal in its journal European Research Studies Journal.

    Volume (Year): IX (2006)
    Issue (Month): 1-2 ()
    Pages: 45-64

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    Handle: RePEc:ers:journl:v:ix:y:2006:i:1-2:p:45-64

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    Web page: http://www.ersj.eu/

    Related research

    Keywords: Exchange Rate; Current Account Deficit; Cointegration Analysis;

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