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The fiscal policy blend and its impact on sectoral growth: The case of Greece

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  • Zervas, Andreas
  • Thomakos, Dimitrios

Abstract

We investigate how different types of government spending and total taxes affect the Greek economy, with a focus on the production side. We analyze their effects on various value-added sectors. Various government spending types impact production sectors differently; notably, government consumption spending has a more substantial effect on boosting the value added of the non-tradable sector. Our findings emphasize the way fiscal policy influences the economy from the production side. This aligns with recent theoretical studies suggesting that government spending significantly affects services. Additionally, we discovered a new insight: higher taxes severely decrease industrial production, increase inflation, with a larger multiplier effect than spending. These results offer crucial policy lessons; they help explain why adjustment programs resulted in significant output losses and highlight when consolidations may be successful.

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  • Zervas, Andreas & Thomakos, Dimitrios, 2026. "The fiscal policy blend and its impact on sectoral growth: The case of Greece," Economic Modelling, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s0264999325003906
    DOI: 10.1016/j.econmod.2025.107395
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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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