Economic policy uncertainty and the Greek economic crisis Articles uri icon

authors

  • Hardouvelis, Gikas
  • KARALAS, GEORGIOS
  • Karanastasis, Dimitrios
  • Samartzis, Panagiotis

publication date

  • August 2024

start page

  • 1199

end page

  • 1215

issue

  • 6

volume

  • 51

International Standard Serial Number (ISSN)

  • 0144-3585

abstract

  • Purpose
    The authors construct an index of economic policy uncertainty (EPU) for Greece using textual analysis and analyze its role in the 10-year Greek economic crisis.

    Design/methodology/approach
    To identify the causal relationship between various measures of economic activity and EPU in Greece, the authors use a sophisticated “shock-based” structural vector autoregressive identification scheme. Additionally, the authors use two additional models to ensure the robustness of the results.

    Findings
    EPU is negatively associated with domestic economic activity and economic sentiment, and positively with bond credit spreads. EPU is also estimated to have prolonged the crisis even in periods when macroeconomic imbalances were cured. The results are robust across various model specifications and different proxies of economic activity.

    Originality/value
    Brunnermeier (2017) observed that uncertainty may be central to understanding the evolution of the Greek crisis. Yet little attention has been paid to policy uncertainty in the existing long and growing literature on the Greek crisis. The authors attempt to fill this gap

subjects

  • Economics