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The Greek Great Depression from a neoclassical perspective

Author

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  • Dimitris Papageorgiou

    (Bank of Greece)

  • Stylianos Tsiaras

    (European University Institute)

Abstract

This paper follows the great depression methodology of Kehoe and Prescott (2002, 2007) to study the importance of total factor productivity (TFP) in the Greek economic crisis over the period 2008-2017. Using growth accounting and the neo- classical growth model, the paper shows that exogenous changes in TFP are crucial for the Greek depression. The theoretical model reproduces quite well the decline in economic activity over 2008-2013 and the subsequent period of slow recovery found in the data. Nevertheless, it is less successful in predicting the magnitude of the decline in output and the labour factor. In addition, including financial frictions and risk shocks into the neoclassical growth model, does not significantly improve the model’s performance.

Suggested Citation

  • Dimitris Papageorgiou & Stylianos Tsiaras, 2021. "The Greek Great Depression from a neoclassical perspective," Working Papers 286, Bank of Greece.
    • Handle: RePEc:bog:wpaper:286
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    Cited by:

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    2. Bandeira, Guilherme & Caballé, Jordi & Vella, Eugenia, 2022. "Emigration and fiscal austerity in a depression," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    3. Dimakopoulou, Vasiliki & Economides, George & Philippopoulos, Apostolis, 2022. "The ECB's policy, the Recovery Fund and the importance of trust and fiscal corrections: The case of Greece," Economic Modelling, Elsevier, vol. 112(C).

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    More about this item

    Keywords

    Great Depression; Greece; Growth Accounting; DSGE;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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