Foreign and Public Deficits in Greece: In Search of Causality

Levy Economics Institute Working Paper No. 771

29 Pages Posted: 6 Aug 2013

See all articles by Michalis Nikiforos

Michalis Nikiforos

Bard College - The Levy Economics Institute

Laura Carvalho

Sao Paulo School of Economics - FGV

Christian Schoder

Macroeconomic Policy Institute (IMK)

Date Written: August 2013

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 Co-Integration analyses.

Keywords: Greece, crisis, public debt, twin deficits, imbalances

JEL Classification: E62, F21, F34, F41

Suggested Citation

Nikiforos, Michalis and Carvalho, Laura and Schoder, Christian, Foreign and Public Deficits in Greece: In Search of Causality (August 2013). Levy Economics Institute Working Paper No. 771, Available at SSRN: https://ssrn.com/abstract=2306572 or http://dx.doi.org/10.2139/ssrn.2306572

Michalis Nikiforos (Contact Author)

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States
(001)845-758-7735 (Phone)

HOME PAGE: http://www.mnikiforos.net

Laura Carvalho

Sao Paulo School of Economics - FGV ( email )

984, Perdizes
Sao Paulo, 05014-901
Brazil

Christian Schoder

Macroeconomic Policy Institute (IMK)

Düsseldorf
Germany

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