The Macroeconomics of the Greek Depression
American Economic Review
vol. 113,
no. 9, September 2023
(pp. 2411-57)
Abstract
Greece experienced a boom until 2007, followed by a collapse of unprecedented magnitude and persistence. We assess the sources of the boom and the bust, using a rich estimated dynamic general equilibrium model. External demand and government consumption fueled the boom in production, whereas transfers fueled the boom in consumption. Different from the standard narrative, wages and prices declined substantially during the bust. Tax policy accounts for the largest fraction of the bust in production, whereas uninsurable risk accounts for the bust in consumption and wages. We assess how the composition of fiscal adjustment and bailouts affected the crisis.Citation
Chodorow-Reich, Gabriel, Loukas Karabarbounis, and Rohan Kekre. 2023. "The Macroeconomics of the Greek Depression." American Economic Review, 113 (9): 2411-57. DOI: 10.1257/aer.20210864Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- E62 Fiscal Policy
- F41 Open Economy Macroeconomics
- H20 Taxation, Subsidies, and Revenue: General