1979–2001: A Greek great depression through the lens of neoclassical growth theory |
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| Institution: | 1. Department of Economics, Athens University of Economics and Business, Greece;2. Department of Economics, University of Ioannina, Greece;3. Economic Research Department, Bank of Greece, Greece;1. School of Medicine and Public Health, The University of Newcastle, Callaghan, NSW 2308, Australia;2. Hunter Medical Research Institute, New Lambton Heights, NSW 2305, Australia;3. Department of General Medicine, John Hunter Hospital, New Lambton Heights, NSW 2305, Australia;4. Department of Community Health Sciences, Boston University School of Public Health, and Clinical Addiction Research and Education Unit, Department of Medicine, Boston University School of Medicine, Boston, MA 02118, USA;5. Boston Medical Center, Boston, MA 02118, USA;6. Centre for Youth Substance Abuse Research, University of Queensland, Herston, QLD 4006, Australia;7. Disciplines of Psychiatry and Addiction Medicine, University of Sydney, Sydney, NSW 2006, Australia;8. Hunter New England Local Health District Population Health, Wallsend, NSW 2287, Australia;9. Hunter New England Local Health District Drug and Alcohol Clinical Services, Newcastle, NSW 2300, Australia;10. Department of Health Sciences, University of York, York, UK;1. Instituto de Alergia e Inmunologia del Sur., Bahia Blanca, Argentina;2. Hospital Italiano Regional del Sur., Allergy Section, Bahia Blanca, Argentina;3. Catholic University of Córdoba, Córdoba, Argentina;4. Universidad de Especialidades Espíritu Santo, School of Medicine, Samborondón, Ecuador;5. Respiralab, Respiralab Research Group, Guayaquil, Ecuador |
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| Abstract: | This paper focuses on the performance of the Greek economy during the period 1979–2001. Following the work of Cole and Ohanian (1999) and Kehoe and Prescott (2002, 2007) this twenty year episode can be characterized as a great depression. We use this methodology and ask whether, given the observed exogenous path of total factor productivity (TFP), the neoclassical growth model can generate an equilibrium behavior that has growth accounting characteristics similar to those in the data. The answer is affirmative: Changes in TFP are crucial in accounting for the Greek great depression. Our model economy predicts a big decline of economic activity during the 80s and until the mid-90s and a strong recovery for the period 1995–2001. This is exactly what happened in Greece. Moreover, the model successfully mimics the actual data with respect to the timing of peaks and troughs and the time paths of most key macroeconomic variables. However, puzzles between theory's predictions and the observed data are not missing. For instance, things are (not surprisingly for the neoclassical growth model) less successful when it comes to the labor factor. |
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