Greece underwent a substantial economic boom until 2007, followed by a profound and enduring economic collapse. A detailed analysis employing a dynamic general equilibrium model revealed that the boom in production was primarily fueled by external demand and government consumption, while increased transfers contributed to higher consumption. Contrary to conventional expectations, both wages and prices experienced significant declines during the collapse. Tax policies played a pivotal role in the decline of production, while the inability to mitigate risks negatively impacted consumption and wages. The study also examined the impact of fiscal adjustments and bailout packages on the crisis.
Chodorow-Reich, Gabriel, Loukas Karabarbounis, and Rohan Kekre. 2023. “The Macroeconomics of the Greek Depression.” American Economic Review, 113 (9): 2411-57.