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

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

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Publisher Info
Article provided by Springer in its journal Empirical Economics.

Volume (Year): 24 (1999)
Issue (Month): 2 ()
Pages: 183-209
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Handle: RePEc:spr:empeco:v:24:y:1999:i:2:p:183-209

Note: received: October 1996/Final version received: November 1997
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Related research
Keywords: Present value model · excessive current account deficits

Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

Cited by:
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  1. Lau, Evan & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah, 2007. "Accounting for the Current Account Behavior in ASEAN-5," MPRA Paper 1322, University Library of Munich, Germany. [Downloadable!]
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