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The Greek economy under the twin-deficit pressure: a demand orientated growth approach

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  • Elias Soukiazis

    () (Faculty of Economics University of Coimbra and GEMF, Portugal)

  • Micaela Antunes

    (Faculty of Economics University of Coimbra and GEMF, Portugal)

  • Ioannis Kostakis

    (Faculty of Geography, Environment and Applied Economics, Harokopio University, Greece)

Abstract

This paper uses an alternative growth approach in line with Thirlwall´s model in order to predict economic growth in Greece taking into account internal and external imbalances caused by public deficit/debt and lack of trade competitiveness. It is shown that the simple Thirlwall´s Law (given by the product of the ratio of the income elasticities of demand for exports and imports, and the growth of foreign demand) over-predicts real growth in Greece while the more complete extended model, makes a closer prediction which is consistent with the high deficit/debt and current account deficit experienced in this country. The simulation approach shows that the most efficient policy to attain higher growth is to reduce external imbalances while policies to reduce internal imbalances are low growth enhancing.

Suggested Citation

  • Elias Soukiazis & Micaela Antunes & Ioannis Kostakis, 2016. "The Greek economy under the twin-deficit pressure: a demand orientated growth approach," GEMF Working Papers 2016-08, GEMF, Faculty of Economics, University of Coimbra.
    • Handle: RePEc:gmf:wpaper:2016-08.
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    References listed on IDEAS

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    1. Kvedaras, Virmantas & Garcimartín, Carlos & Astudillo, Jhonatan, 2020. "Balance-of-Payments constrained growth dynamics: An empirical investigation," Economic Modelling, Elsevier, vol. 89(C), pages 232-244.
    2. Irfan Civcir & M. Emir Yücel, 2020. "Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey," SAGE Open, , vol. 10(2), pages 21582440209, June.
    3. Deimante Blavasciunaite & Lina Garsviene & Kristina Matuzeviciute, 2020. "Trade Balance Effects on Economic Growth: Evidence from European Union Countries," Economies, MDPI, Open Access Journal, vol. 8(3), pages 1-15, July.
    4. Hammad Manzoor & Muhammad Zeeshan Younas & Rashid Mehmood & Muhammad Ali Rizwan, 2019. "A Twin Deficit Hypothesis: The Case Study of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 8(3), pages 117-131, September.

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