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Consumption-smoothing and the excessiveness of Greece's current account deficits

Author

Listed:
  • Stelios Makrydakis

    () (European Central Bank, Postfach 160319, D-60066 Frankfurt am Main, Germany)

Abstract

This paper investigates whether the sequence of current account deficits experienced in Greece over the 1950-1995 period have been excessive. The degree of excessiveness is gauged by comparing the actual current account series to an optimal current account measure derived from an intertemporal model of current account determination. The findings indicate that optimal consumption smoothing did not take place over the sample period suggesting that the existing restrictions to the free flow of capital were binding. More importantly the stock of net foreign liabilities was found to have been set on an unsustainable path following the 1989/90 balance of payments crisis yet there is clear evidence that this tendency has been gradually reversed during the last couple of years.

Suggested Citation

  • Stelios Makrydakis, 1999. "Consumption-smoothing and the excessiveness of Greece's current account deficits," Empirical Economics, Springer, vol. 24(2), pages 183-209.
  • Handle: RePEc:spr:empeco:v:24:y:1999:i:2:p:183-209
    Note: received: October 1996/Final version received: November 1997
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    Citations

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    Cited by:

    1. Carmen M. Reinhart & Christoph Trebesch, 2015. "The Pitfalls of External Dependence: Greece, 1829–2015," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 307-328.
    2. Lau, Evan & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah, 2007. "Accounting for the Current Account Behavior in ASEAN-5," MPRA Paper 1322, University Library of Munich, Germany.
    3. Ahmad Zubaidi Baharumshah & Hamizun Bin Ismail, 2012. "The present value model and Thailand's current account balance," Journal of Economic Studies, Emerald Group Publishing, vol. 39(3), pages 337-355, December.
    4. Olumuyiwa S Adedeji, 2001. "The Size and Sustainability of Nigerian Current Account Deficits," IMF Working Papers 01/87, International Monetary Fund.
    5. Neaime Simon, 2004. "Sustainability of Budget Deficits and Public Debt in Lebanon: A Stationarity and Co-Integration Analysis," Review of Middle East Economics and Finance, De Gruyter, vol. 2(1), pages 42-60, April.
    6. repec:eee:joecas:v:12:y:2015:i:1:p:1-21 is not listed on IDEAS
    7. Tahir Mukhtar & Aliya H. Khan, 2011. "The Current Account Dynamics in Pakistan: An Intertemporal Optimisation Perspective," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 401-421.
    8. repec:pid:journl:v:55:y:2016:i:4:p:397-419 is not listed on IDEAS

    More about this item

    Keywords

    Present value model · excessive current account deficits;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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