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Foreign and Public Deficits in Greece: In Search of Causality

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  • Michalis Nikiforos
  • Laura Carvalho
  • Christian Schoder

Abstract

The paper discusses the trajectories of the Greek public deficit and sovereign debt over the last three decades and its connection to the political and economic environment of the same period. We pay special attention to the causality between the public and the foreign deficit. We argue that from 1980 to 1995 causality ran from the public deficit to the foreign deficit, but that due to the European monetary unification process and the adoption of the common currency, causality has reversed since. This hypothesis is tested and verified econometrically using both Granger Causality and Cointegration analyses.

Suggested Citation

  • 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.
    • Handle: RePEc:lev:wrkpap:wp_771
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    References listed on IDEAS

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    Cited by:

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    2. Constantine, Collin, 2014. "Rethinking the Twin Deficits," MPRA Paper 58798, University Library of Munich, Germany.

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    More about this item

    Keywords

    Greece; crisis; public debt; twin deficits; imbalances;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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