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The Impact of the European Economic & Monetary Union on the Stability of the Greek Economy

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  • Eleni Roussou
  • Norman Cameron

Abstract

This paper addresses the issue of how the stability of the Greek economy will be affected by Greece’s accession to the European Economic and Monetary Union (EMU). The theoretical basis for most of the discussion of this issue to date is found in the theory of optimum currency areas (OCA), which identifies the nature of economic disturbances as key to whether currency unions provide a net benefit. We use vector autoregression to identify the nature of the disturbances that the Greek economy has experienced in the past, and add such disturbances to stochastic simulations of a structural macroeconomic model of the Greek economy, part of a larger model of the European economy known as QUEST II. The main conclusion is that the EMU will make output slightly more stable in the Greek economy. Therefore, the Greek economy will reap the efficiency gains of the common currency without suffering significantly from the elimination of its monetary sovereignty.

Suggested Citation

  • Eleni Roussou & Norman Cameron, 2005. "The Impact of the European Economic & Monetary Union on the Stability of the Greek Economy," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 85-98.
  • Handle: RePEc:ers:journl:v:viii:y:2005:i:1-2:p:85-98
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    More about this item

    Keywords

    EMU; Greek Economy; optimum currency areas; economic stability;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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