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Foreign and Public Deficits in Greece: In Search of Causality

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  • Michalis Nikiforos
  • Laura Carvalho
  • Christian Schoder

Abstract

The paper discusses the trajectories of the Greek public deficit and sovereign debt over the last three decades and its connection to the political and economic environment of the same period. We pay special attention to the causality between the public and the foreign deficit. We argue that from 1980 to 1995 causality ran from the public deficit to the foreign deficit, but that due to the European monetary unification process and the adoption of the common currency, causality has reversed since. This hypothesis is tested and verified econometrically using both Granger Causality and Cointegration analyses.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_771.

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Date of creation: Aug 2013
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Handle: RePEc:lev:wrkpap:wp_771

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Keywords: Greece; crisis; public debt; twin deficits; imbalances;

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