Nicos Christodoulakis

Macroeconomic Policy : Inflation, Wealth and the Exchange Rate

Part 1 Theory: a new Keynesian framework for macroeconomic policy the linkages between financial weapons and financial targets - a comparative static analysis the dynamics of price stabilization. Part 2 Application: a stock-flow model with model-consistent or regressive expectations macroeconomic policy rules for economic stabilization counterfactual simulation with forward-looking expectations a simulation of the cost-push economy the controlled economy with reformed wages. Part 3 Method: the derivation and use of linear model the design of economic policy rules. Part 4 Conclusion: summary of results and conclusions.

Forecasting energy consumption and energy related CO2 emissions in Greece: An evaluation of the consequences of the Community Support Framework II and natural gas penetration

Abstract This study seeks to assess the future demand for energy and the trajectory of CO2 emissions level in Greece, taking into account the impact of the Community Support Framework (CSF) II on the development process and the penetration of natural gas, which is one of the major CSF II interventions, in the energy system. Demand equations for each sector of economic activity (traded, non-traded, public and agricultural sector) and for each type of energy (oil, electricity and solid fuels) are derived. The energy system is integrated into a fully developed macroeconometric model, so that all interactions between energy, prices and production factors are properly taken into account. Energy CO2 forecasts are then derived based on alternative scenarios for the prospects of the Greek economy. According to the main findings of the paper the growth pattern of forecast total energy consumption closely follows that of forecast output showing no signs of decoupling. As regards CO2 emissions, they are expected to increase with an annual average rate, which is higher than world forecasts.

A four-sector macroeconometric model for Greece and the evaluation of the community support framework 1994-1999

Abstract This paper describes a macroeconometric model for Greece and its use for the evaluation of the effects that investment inflows from European Union in the form of the Community Support Framework (CSF) might have on the economy. The model consists of four sectors of economic activity, namely those of traded and non-traded goods, the public and agricultural sectors, and includes a detailed system of price formation, wage setting and public finances. The model is subjected to a number of stylised shocks in domestic and international variables, so that the dynamic properties and multipliers can be analysed. The evaluation of likely CSF effects is conducted by first constructing a benchmark forecast until 2010 and then assess the impact of CSF actions. CSF flows cause both a rise in total demand and in domestic supply through positive supply-side externalities and the evaluation distinguishes between a very low and a full degree of utilising the plausible opportunities. The universal conclusion is that, in the absence of externalities, CSF actions produce only a temporary rise in activity and employment. After the period of inflows expires, the economy will return to the course that would have been the case without the funds. However, if externalities are assumed to operate even at a moderate scale, the picture changes starkly: output, productivity, employment and the exporting capacity of the country improve significantly.

The demand for energy in Greece: assessing the effects of the Community Support Framework 1994-1999

The paper estimates the demand for energy in Greece in the tradable and non-tradable sectors and for the three main types of energy, namely oil, electricity and solid fuel. Using the estimated demand functions, forecasts of the demand for energy until the year 2010 are derived by incorporating the system of demand and energy price equations into a fully-fledged annual macroeconometric model. The model is subsequently used to forecast the demand for energy and the shares of various forms under alternative assumptions about the effects of the Community Support Framework (CSF). It is found that the demand for energy will be significantly affected by the presence of externalities in the implementation of CSF that give rise to positive supply-side effects and boost growth. In the absence of supply-side externalities, total energy demand rises by 1.4% above the benchmark non-CSF scenario. With growth-inducing externalities, total demand will increase at year 2010 by 6.0% above baseline.

The Effects of the Second Community Support Framework 1994-99 on the Greek Economy

Abstract The purpose of this paper in to provide an ex ante assessment of the effects that the second Community Support Framework (CSF) is likely to have on the economy of Greece in the short and medium run by employing the projections of a four-sector annual macroeconometric model. The model is simulated under alternative assumptions accordingly to whether the effects are stemming from the demand side of the economy or incorporate the supply-side externalities that show the improvement of factor productivity by CSF actions. In the absence of externalities, output rises during the period of the CSF 1994–99, but then returns to the benchmark course without any lasting improvement. When externalities are taken into account, total output in year 2010 will be higher than baseline by an impressive 9.5 percent, and will continue to grow at a rate faster by 0.26 percent per annum than would be otherwise. Over the period of simulation the output growth rate averages above the benchmark rate by 0.55 percent per annum, and employment expands by an average of 95,000 new jobs. This finding has serious implications for the allocation, implementation, and monitoring of the Plan, because it calls for actions that ensure the maximum possible efficiency if a lasting improvement is to occur in the economy.

Efficiency testing revisited: a foreign exchange market with Bayesian learning

Abstract The paper re-examines the efficiency hypothesis in the foreign exchange market. The traditional efficiency-testing equations are reviewed and a more general model is developed that incorporates Bayesian revisions of devaluation expectations. A number of properties regarding the pattern of the coefficients in efficiency-testing equations are established. The empirical estimation of the model by using data from the emerging foreign exchange market in Greece confirms the properties of the theoretical model.

From Grexit to Growth: On Fiscal Multipliers and how to End Recession in Greece:

Three years after the implementation of the Adjustment Programme for Greece, public debt remains at unsustainable levels. Despite recent improvements in meeting deficit targets and the fact that the risk of exit from the Euro Area has subsided, growth is still missing and unemployment has surpassed 25 per cent, causing major social tensions. The paper argues that a critical parameter of such failure was that the Programme grossly underestimated the adverse effects that fiscal correction might have on growth. Fiscal multipliers are found to be significant in the Euro Area so that fiscal cuts had strong and permanent Keynesian effects, rather than a transitive and minor downturn as initially assumed. In light of this, the paper argues that policies should now concentrate on enhancing growth and by relaxing fiscal targets allow the multipliers to raise activity as the only route to safeguard the exit from recession and ensure sustainability of debt.

Target zones and alternative proposals for G3 policy coordination: An empirical evaluation using GEM

Abstract The Extended Target Zone (ETZ) proposal for economic policy coordination is quantitatively assessed and compared with a number of alternative schemes that do not adopt explicit exchange rate targeting. The main finding of the paper is that if exchange rate volatility matters, then the ETZ scheme is clearly superior to the alternatives compared here. However, an important qualification is the high degree of fiscal activism required to prevent output and inflation from deviating from target levels in order to offset the active monetary policy employed to achieve the exchange rate targets. Moreover, when this is combined with an uneven distribution of welfare gains and associated incentive compatibility problems, the ETZ scheme may become unsustainable leading to a breakdown of cooperation.

Achieving convergence within the European Union: The role of structural funds in the case of Greece

Abstract In the context of the European Union (EU) the process of real convergence is viewed as a prerequisite for economic and social cohesion and particular weight has been put on remedying structural deficiencies in less developed countries, such as Greece. The basic policy instrument for achieving cohesion within the EU is the inflow of Structural Funds, which aim at increasing the physical and human capital of each country. In the case of Greece, the aim of Structural Funds is to gear the economy onto a sustainable development course and, thus, enhance real convergence with other European economies. To capture the impact of Structural Funds’ inflows on the Greek economy, we assume that they operate in two parallel ways: first, they cause a rise in total demand, through domestic expenditure and personal income; second, in domestic supply by inducing a number of productivity externalities. The estimates show that Structural Funds can be of crucial importance for achieving real convergence with the rest...

The stock exchange in a macroeconometric model

Abstract A rational expectations model of the stock exchange is constructed in the framework provided by the National Institute model (Version-7). The existing investment equations of this model are re-estimated so as to show sensitivity to the valuation ratio. A linear reduction of the amended National Institute model is derived and shown to possess saddle path properties. The linear reduction is used to derive the new equilibrium position after a fiscal contraction. The effects of jumps in the valuation ratio and the capital stock on the linear reduction and full non-linear models are then compared.