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A New Growth Model for the Greek EconomyLessons for Europe from the Greek Crisis

A New Growth Model for the Greek Economy: Lessons for Europe from the Greek Crisis [This chapter argues that Greek economy’s buoyant growth in the precrisis decade was not entrenched in solid economic fundamentals and was likely to come to a “sudden stop.” The macroeconomic adjustment would have required a major expenditure switch in production from non-tradable to tradable goods, which did not materialize. Despite massive nominal wage deflation, price competitiveness did not improve as necessary. The main explanation lies in the Troika’s timing of structural reforms. While labor market reforms were swiftly and radically implemented, procompetitive product market reforms lagged. As a result, nominal wages collapsed, but prices remained stable. This aggravated the fall in household disposable income and domestic demand. As a result, price competitiveness and consequently foreign demand did not improve, making the recession harsher than expected.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

A New Growth Model for the Greek EconomyLessons for Europe from the Greek Crisis

Editors: Petrakis, Panagiotis E.
Manasse, Paolo
A New Growth Model for the Greek Economy — Sep 1, 2016
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References (2)

Publisher
Palgrave Macmillan US
Copyright
© The Editor(s) (if applicable) and The Author(s) 2016
ISBN
978-1-137-58943-9
Pages
73 –82
DOI
10.1057/978-1-137-58944-6_5
Publisher site
See Chapter on Publisher Site

Abstract

[This chapter argues that Greek economy’s buoyant growth in the precrisis decade was not entrenched in solid economic fundamentals and was likely to come to a “sudden stop.” The macroeconomic adjustment would have required a major expenditure switch in production from non-tradable to tradable goods, which did not materialize. Despite massive nominal wage deflation, price competitiveness did not improve as necessary. The main explanation lies in the Troika’s timing of structural reforms. While labor market reforms were swiftly and radically implemented, procompetitive product market reforms lagged. As a result, nominal wages collapsed, but prices remained stable. This aggravated the fall in household disposable income and domestic demand. As a result, price competitiveness and consequently foreign demand did not improve, making the recession harsher than expected.]

Published: Sep 1, 2016

Keywords: Total Factor Productivity; Real Exchange Rate; Real Wage; Price Consumer Index; European Central Bank

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