IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/2852.html
   My bibliography  Save this paper

Economic Growth in Greece: Past Performance and Future Prospects

Author

Listed:
  • Bosworth, Barry
  • Kollintzas, Tryphon

Abstract

This Paper examines the past growth performance of the Greek economy and examines the outlook for future growth in light of the macroeconomic stabilization that was achieved over the last half of the 1990s and following Greece's admission to the Euro currency zone. The Greek economy performed very poorly over the quarter century from 1970 to 1995, during which it was the poorest country in the European Union. We develop a set of growth accounts that attribute part of the deteriorating performance to a falloff in capital formation, but the most dramatic factor is a sharp deterioration in multi-factor productivity, or the efficiency of the economy. Part of the explanation lies with the collapse of macroeconomic policy that took the form of large fiscal deficits and very high rates of inflation; but the Greek economy also fares poorly in other dimensions of its economic institutions, such as competitiveness of its tradable goods sectors, a highly constrained labor market, and a reputation as an unattractive market for foreign capital. Over the last half of the 1990s, Greece undertook a successful program to restore fiscal and monetary stability ? by the end of 2000, it had qualified for admission to the Euro currency system. The restoration of rational macroeconomic policies also led to an improvement in economic growth to the extent that Greece matched the performance of the rest of the EU over the 1995-2000 period. It also appears that these growth rates are sustainable and consistent with current rates of capital accumulation. The next step would be for Greece to attain an accelerated path of growth that would allow it to catch up with the rest of EU in future years, following perhaps the experience of Ireland. We conclude, however, that Greece still lacks a strategy to achieve a further acceleration of growth. It lacks a strong export sector comparable to that of Ireland; and, while it continues to be an unattractive destination for foreign direct investment, domestic rates of saving are insufficient to finance higher rates of capital investment. It needs to institute a faster past of reform of domestic economic institutions if it hopes to promote innovation and entrepreneurship.

Suggested Citation

  • Bosworth, Barry & Kollintzas, Tryphon, 2001. "Economic Growth in Greece: Past Performance and Future Prospects," CEPR Discussion Papers 2852, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2852
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP2852
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. International Monetary Fund, 2000. "Barbados: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/158, International Monetary Fund.
    2. Tsakalotos, Euclid, 1998. "The Political Economy of Social Democratic Economic Policies: The Pasok Experiment in Greece," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(1), pages 114-138, Spring.
    3. -, 1993. "A new international industrial order," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 30103, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. International Monetary Fund, 2000. "Portugal: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/152, International Monetary Fund.
    5. International Monetary Fund, 2000. "Italy: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/071, International Monetary Fund.
    6. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    7. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
    8. Eichengreen, Barry, 1994. "Institutions and Economic Growth: Europe After World War II," CEPR Discussion Papers 973, C.E.P.R. Discussion Papers.
    9. International Monetary Fund, 2000. "Luxembourg: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/065, International Monetary Fund.
    10. International Monetary Fund, 2000. "Sweden: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/118, International Monetary Fund.
    11. Mr. Dimitri G Demekas & Mr. Zenon Kontolemis, 1996. "Unemployment in Greece: A Survey of the Issues," IMF Working Papers 1996/091, International Monetary Fund.
    12. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    13. International Monetary Fund, 1999. "Greece: Staff Report for the 1999 Article IV Consultation," IMF Staff Country Reports 1999/131, International Monetary Fund.
    14. International Monetary Fund, 2000. "Austria: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/095, International Monetary Fund.
    15. International Monetary Fund, 2000. "Japan: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/098, International Monetary Fund.
    16. Kollintzas, Tryphon & Vassilatos, Vanghelis, 2000. "A small open economy model with transaction costs in foreign capital," European Economic Review, Elsevier, vol. 44(8), pages 1515-1541, August.
    17. Kollintzas, Tryphon & Vassilatos, Vanghelis, 1996. "A Stochastic Dynamic General Equilibrium Model for Greece," CEPR Discussion Papers 1518, C.E.P.R. Discussion Papers.
    18. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
    19. International Monetary Fund, 2000. "Ireland: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/097, International Monetary Fund.
    20. International Monetary Fund, 2000. "Spain: Staff Report for the 2000 Article IV Consultation," IMF Staff Country Reports 2000/151, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michaelides, Panayotis G. & Papageorgiou, Theofanis & Vouldis, Angelos T., 2013. "Business cycles and economic crisis in Greece (1960–2011): A long run equilibrium analysis in the Eurozone," Economic Modelling, Elsevier, vol. 31(C), pages 804-816.
    2. Alogoskoufis, George, 2021. "Historical cycles of the economy of modern Greece from 1821 to the present," LSE Research Online Documents on Economics 109848, London School of Economics and Political Science, LSE Library.
    3. Kollintzas, Tryphon & Papageorgiou, Dimitris & Vassilatos, Vanghelis, 2018. "Market and political power interactions in Greece: A theory," European Journal of Political Economy, Elsevier, vol. 53(C), pages 59-83.
    4. Tryphon Kollintzas & Dimitris Papageorgiou & Efthymios Tsionas & Vanghelis Vassilatos, 2018. "Market and political power interactions in Greece: an empirical investigation," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-43, December.
    5. Belegri-Roboli, Athena & Michaelides, Panayotis G. & Markaki, Maria, 2007. "Input - Output Modelling of Labour Productivity and the Working Time in Greece," MPRA Paper 74453, University Library of Munich, Germany.
    6. Michalis Nikiforos & Laura Carvalho & Christian Schoder, 2015. "“Twin deficits” in Greece: in search of causality," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 38(2), pages 302-330, October.
    7. Angelos VOULDIS & Panayotis MICHAELIDES & John MILIOS, 2008. "Do Technology Shocks affect Output and Profitability over the Business Cycle in Greece (1960-2008)?," EcoMod2008 23800152, EcoMod.
    8. Neumann, Michael, 2006. "Do Larger Nations Have Higher Unemployment Rates?," Discussion Paper Series 85, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    9. Frank Barry, 2003. "Economic Integration and Convergence Processes in the EU Cohesion Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 41(5), pages 897-921, December.
    10. Bitros, George C., 2012. "From Riches to Rags or What Went Wrong in Greece," MPRA Paper 43504, University Library of Munich, Germany.
    11. Konstantakis, Konstantinos N. & Michaelides, Panayotis G. & Vouldis, Angelos T., 2016. "Non performing loans (NPLs) in a crisis economy: Long-run equilibrium analysis with a real time VEC model for Greece (2001–2015)," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 451(C), pages 149-161.
    12. Belegri-Roboli, Athena & Markaki, Maria & Michaelides, Panayotis G., 2010. "The macroeconomic impacts of the Attiki Odos motorway in the Greek Economy: An Input–Output Analysis," MPRA Paper 74429, University Library of Munich, Germany.
    13. Belegri-Roboli, Athena & Michaelides, Panayotis G., 2007. "Technology and Sector Clustering in the Greek Economy," MPRA Paper 74487, University Library of Munich, Germany.
    14. Michalis Nikiforos & Laura Carvalho & Christian Schoder, 2013. "Foreign and Public Deficits in Greece: In Search of Causality," Economics Working Paper Archive wp_771, Levy Economics Institute.
    15. Louzis, Dimitrios P. & Vouldis, Angelos T. & Metaxas, Vasilios L., 2012. "Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1012-1027.
    16. George Alogoskoufis, 2019. "Greece and the Euro: A Mundellian Tragedy," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 136, Hellenic Observatory, LSE.
    17. ATHANASENAS Athanasios & POLYCHRONIDOU Persefoni & CHAPSA Xanthippi, 2021. "An Economic Crisis “State of Shock”: An Empirical Analysis of the Greek Economy," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 02, June.
    18. Konstantakis, Konstantinos & Michaelides, Panayotis G., 2014. "The Political Economy of Car Sales in Athens, Greece," MPRA Paper 74489, University Library of Munich, Germany.
    19. Gogos, Stylianos G. & Mylonidis, Nikolaos & Papageorgiou, Dimitris & Vassilatos, Vanghelis, 2014. "1979–2001: A Greek great depression through the lens of neoclassical growth theory," Economic Modelling, Elsevier, vol. 36(C), pages 316-331.
    20. Panayotis G. Michaelides & Konstantinos N. Konstantakis, 2015. "Business Cycles and Economic Crisis: The Case of Car Sales in Athens, Greece (2000-2012)," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(1), pages 69-83, June.
    21. Athena Belegri-Roboli & Panayotis Michaelides, 2006. "Measuring Technological Change in Greece," The Journal of Technology Transfer, Springer, vol. 31(6), pages 663-671, November.
    22. Belegri-Roboli, Athena & Michaelides, Panayotis G., 2005. "The Basic Characteristics of the Regional Department of Attica and Estimates of Potential Output and Potential Labour," MPRA Paper 74452, University Library of Munich, Germany.
    23. Antonopoulos, Christos & Sakellaris, Plutarchos, 2009. "The contribution of Information and Communication Technology investments to Greek economic growth: An analytical growth accounting framework," Information Economics and Policy, Elsevier, vol. 21(3), pages 171-191, August.
    24. Athena Belegri-Roboli & Aggeliki Demertzi & Maria Markaki & Panayotis Michaelides, 2011. "An Input-Output Analysis of Environmental Effects of Infrastructure Investments in the Greek Economy: The Case of - Attiki Odos - motorway (refereed paper)," ERSA conference papers ersa10p481, European Regional Science Association.
    25. Belegri-Roboli, Athena & Demertzi, Aggeliki & Markaki, Maria & Michaelides, Panayotis G., 2011. "Labour Gap, Output Gap and Inflation by Economic Sector: The case of Greece and the Peloponnese Region (2000-2007)," MPRA Paper 74446, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ciarán Michael Casey, 2014. "Averting Crisis? Commentary from the International Institutions on the Irish Property Sector in the Years Before the Crash," The Economic and Social Review, Economic and Social Studies, vol. 45(4), pages 537-557.
    2. Robert M. Stern, 2011. "Trade in Financial Services—Has the IMF been Involved Constructively?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(1), pages 65-92, February.
    3. Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics.
    4. Constantinos Stephanou & Dimitri Vittas, 2007. "Public Debt Management and Debt Market Development in Cyprus: Evolution, Current Challenges and Policy Options," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 1(1), pages 49-80, June.
    5. Dutton, Edward & Bakhiet, Salaheldin Farah & Ziada, Khaled Elsayed & Essa, Yossry Ahmed Sayed & Blahmar, Tahani Abdulrahman Muhammed, 2017. "A Negative Flynn Effect in Khartoum, the Sudanese capital," Intelligence, Elsevier, vol. 63(C), pages 51-55.
    6. Murray Petrie, 2002. "Institutions, Social Norms and Well-being," Treasury Working Paper Series 02/12, New Zealand Treasury.
    7. Homi Kharas & Brian Pinto & Sergei Ulatov, 2001. "An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 1-68.
    8. Zsolt Darvas, 2010. "The Impact of the Crisis on Budget Policy in Central and Eastern Europe," OECD Journal on Budgeting, OECD Publishing, vol. 10(1), pages 1-42.
    9. Alessio Fusco & Philippe Kerm & A. Alieva & L. Bellani & F. Etienne-Robert & A.-C. Guio & I. Kyzyma & K. Leduc & P. Liégeois & M.N.P. Alperin & A. Reinstadler & E. Sierminska & D. Sologon & P. Thill &, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Luxembourg," GINI Country Reports luxembourg, AIAS, Amsterdam Institute for Advanced Labour Studies.
    10. Ronald McKinnon & Gunther Schnabl, 2003. "Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," The World Economy, Wiley Blackwell, vol. 26(8), pages 1067-1088, August.
    11. George Kyriacou & Maria Papageorghiou, 2010. "Assessing the Equilibrium Exchange Rate of the Cyprus Pound at the time of Euro Adoption," Working Papers 2010-6, Central Bank of Cyprus.
    12. Giovanni P. Olivei, 2002. "Japan's approach to monetary policy," New England Economic Review, Federal Reserve Bank of Boston, issue Q 2, pages 39-43.
    13. Kearney, Ide & McCoy, Daniel & Duffy, David & McMahon, Michael & Smyth, Diarmaid, 2000. "Assessing the Stance of Irish Fiscal Policy," Papers BP2001/1, Economic and Social Research Institute (ESRI).
    14. repec:esr:chaptr:jacb200010 is not listed on IDEAS
    15. Mr. Driton Qehaja, 2012. "Fiscal Policy Response to External Crises the Case of Moldova 1998-2010," IMF Working Papers 2012/082, International Monetary Fund.
    16. Bernhard Reinsberg & Alexander Kentikelenis & Thomas Stubbs & Lawrence King & Centre for Business Research, 2018. "The World System & the Hollowing-out of State Capacity: How Structural Adjustment Programs Impact Bureaucratic Quality in Developing Countries," Working Papers wp503, Centre for Business Research, University of Cambridge.
    17. Daoud, Adel & Reinsberg, Bernhard & Kentikelenis, Alexander E. & Stubbs, Thomas H. & King, Lawrence P., 2019. "The International Monetary Fund’s interventions in food and agriculture: An analysis of loans and conditions," Food Policy, Elsevier, vol. 83(C), pages 204-218.
    18. José De Gregorio & Jong-Wha Lee, 1999. "Economic Growth in Latin America: Sources and Prospects," Documentos de Trabajo 66, Centro de Economía Aplicada, Universidad de Chile.
    19. Robert M Stern, 2009. "Trade in Financial Services--Has the IMF Been Involved Constructively?," Working Papers 587, Research Seminar in International Economics, University of Michigan.
    20. Brzoza-Brzezina, Michał, 2005. "Lending booms in the new EU Member States: will euro adoption matter?," Working Paper Series 543, European Central Bank.
    21. repec:onb:oenbwp:y::i:61:b:1 is not listed on IDEAS
    22. Michal Brzoza-Brzezina, 2005. "Lending Booms in Europe’s Periphery: South-Western Lessons for Central-Eastern Members," Macroeconomics 0502002, University Library of Munich, Germany.

    More about this item

    Keywords

    Greek economy; Structural funds package; Economic institutions; Reforms;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2852. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.