DÉJÀ VU? THE GREEK CRISIS EXPERIENCE, THE 2010s VERSUS THE 1930s. LESSONS FROM HISTORY
The University of Manchester and Bank of Greece
Bank of Greece
The past Greek crisis experience is more or less terra incognita. In all historical empirical studies Greece is systematically neglected or included only sporadically in their cross-country samples. In the national literature too there is little on this topic. In this paper we focus on the Greek experience of the Great Depression and use it as a benchmark against which to assess the policy choices and constraints that Greece faces today, with the ultimate aim to draw policy lessons from history and warn against a repeat of the same outcome. The 1930s crisis episode is used as a useful testing ground to compare the two crises episodes, ‘then’ and ‘now’; detect differences and similarities, discuss the policy facts and assess the impact of policy pursued on output. To the best of our knowledge, this paper is the first attempt to study the Greek crisis experience over the two historical episodes and detect similarities and differences. Comparisons with the interwar period show that the current crisis of the Greek economy should be classified a great depression rather than a great recession and that the inability of the national authorities to credibly adhere to their commitment to a nominal anchor was at the root of the country’s failure.
Keywords: economic crisis, economic policy, interwar Greece
JEL classification: F33, H6, N14, N24.
Acknowledgments: The authors thank participants at the 2013 EHEC at London, at the 7th SEEMHN Conference at Tirana, at a seminar at the Bank of Greece and at the 2012 WEHC at South Africa for helpful comments and fruitful exchange discussions. Special thanks should be attributed to the domestic economy division, the money division and the external account division of the Bank of Greece for providing some of their data. We are grateful to Antony Antoniou for kindly sharing with us his data on government spending and to Heather Gibson and George Tavlas for their comments that helped us to clarify some important issues. During the writing process George Chouliarakis was a research fellow at the Bank of Greece. The views expressed here are those of the authors and do not necessarily reflect those of the Bank of Greece. We alone are responsible for the remaining errors or omissions.
Economic Research Department
Bank of Greece
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