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The real exchange rate of euro and Greek economic growth

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  • Papanikos, Gregory T.

Abstract

This study argues that an overvalued euro has caused the largest ever drop in Greece's GDP growth since the World War II. Sharp declines of GDP growth would have been avoided had ECB's monetary and exchange rate policy been different and more conducive to countries that suffered the most from the world economic crisis of 2007. Greece was the last to be hit, but was unfortunately ‘battered’ really hard. In this study, it is found that (a) the real effective exchange rate of euro was 20% overvalued and (b) this has had a negative impact on Greek economic growth. A 10% undervaluation would have increased the rate of growth of per capita GDP by almost an additional 1.25% per annum. This would have made the economic recession less severe. During the crisis years, it seems that the ECB's monetary and exchange rate policy favored particular countries in the eurozone, and Germany emerges as the big winner.

Suggested Citation

  • Papanikos, Gregory T., 2015. "The real exchange rate of euro and Greek economic growth," The Journal of Economic Asymmetries, Elsevier, vol. 12(2), pages 100-109.
    • Handle: RePEc:eee:joecas:v:12:y:2015:i:2:p:100-109
    DOI: 10.1016/j.jeca.2015.04.002
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    Cited by:

    1. Constantin Colonescu, 2017. "Macroeconomic Effects of the European Monetary Union: A Counterfactual Analysis," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 3(2), pages 171-186, April.
    2. Lucio Gobbi & Stefano Lucarelli, 2021. "ECB quantitative easing, euro depreciation and supply chains: Industry-level estimates for Germany, Italy and Greece. New prospects for a Minskyan big bank?," PSL Quarterly Review, Economia civile, vol. 74(296), pages 25-50.
    3. Chen Ku‐Hsieh, 2021. "Depreciate to save the economy? An empirical evidence worldwide," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1563-1585, January.
    4. La Saidi & Pasrun Adam & Rostin & Zainuddin Saenong & Muh. Yani Balaka & Gamsir & Asmuddin & Salwiah, 2017. "The Effect of Stock Prices and Exchange Rates on Economic Growth in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 527-533.
    5. Coccia, Mario, 2016. "The relation between price setting in markets and asymmetries of systems of measurement of goods," The Journal of Economic Asymmetries, Elsevier, vol. 14(PB), pages 168-178.
    6. Masagus M. Ridhwan & Affandi Ismail & Peter Nijkamp, 2023. "The real exchange rate and economic growth: a meta-analysis," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(2), pages 287-318, June.
    7. Dimitris Doulos & Odysseus Katsaitis & George Zombanakis, 2020. "Is the emphasis on unit labor costs an effective export-promoting policy? A comparison between Greece and Portugal," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 393-410, September.
    8. Gregory T. Papanikos, 2024. "The Future of Globalization," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 10(2), pages 87-108, April.
    9. Taoufik Bouraoui & Helmi Hammami, 2017. "Does political instability affect exchange rates in Arab Spring countries?," Applied Economics, Taylor & Francis Journals, vol. 49(55), pages 5627-5637, November.

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