The Determinants of Economic Fluctuations in Greece: An Empirical Investigation (1995-2014)

In this work, we investigate the determinants of the Greek Business Cycle in the time period 1995-2014. To this end, we make use of a wide dataset in a quarterly format, which contains all the major macroeconomic and financial variables that have had a certain impact on the Greek economy. We apply a number of relevant econometric techniques such as filtering, Fourier analysis, white noise tests, unit root tests, structural breaks tests, backward regression and rolling windows analysis. Our findings show that the Greek business cycle exhibits two structural breaks, one in 2004 (Q3) and one in 2011(Q4). In the sub- period 1995-2004, the 10-year bond-yields and the elections were found to have a pro-cyclical character on the Greek Business Cycle, while the formation of EMU was found to have a counter-cyclical effect. In the time period 2005-2012, Greek credit and imports were found have a strong pro-cyclical impact, while the overall EU-17 Business Cycle and the Troika had a countercyclical impact on the Greek economy. Further research on the implications of the Greek crisis for other countries would be important.