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Bank of Greece Economic Bulletin, Issue 53

26/07/2021 - Press Releases

Today, the Bank of Greece published the latest issue of its Economic Bulletin (No. 53/July 2021).

The articles published in the Economic Bulletin reflect the views of the authors and not necessarily those of the Bank of Greece.

Issue 53 features the following five articles:

Dimitris Malliaropulos, Dimitris Papageorgiou, Melina Vasardani and Evangelia Vourvachaki: “The impact of the Recovery and Resilience Facility on the Greek economy”

This study assesses the potential macroeconomic impact of the stimulus and the structural reforms supported by the Recovery and Resilience Facility (RRF) on the Greek economy. The set-up is a Dynamic Stochastic General Equilibrium (DSGE) model that is augmented to account for the main features of Greece’s plan under the RRF framework. The results suggest that the full and timely implementation of the Recovery and Resilience Plan (RRP) implies significant benefits for the Greek economy. Real GDP, private investment and employment can potentially increase by 6.9%, 20% and 4%, respectively, by 2026. Tax revenues also increase, creating fiscal space that can be used to further boost economic activity. The implementation of the structural reforms included in the RRP is necessary for maintaining important benefits also in the long run. The results indicate that the potential increase in long-run GDP from selected quantifiable reforms ranges between 6% and 9.9%, with gains extending to other macro variables.


Dimitra Dimitropoulou and Anastasia Theofilakou: “Explaining the cross-country differences in the economic fallout during the COVID-19 pandemic crisis”

This study investigates the main drivers of the differences in the economic fallout in advanced economies during the COVID-19 crisis. In addition to containment measures, the analysis places emphasis on pre-crisis factors that may have bolstered economic resilience during the health crisis and mitigated the output loss. Also, it assesses the role of discretionary fiscal policy in 2020 in explaining the cross-country variation in the economic fallout by explicitly controlling for the simultaneity of the policy measures and the size of the GDP shock. The authors find that factors such as social distancing measures and the structure of the economy, which are directly related to the COVID-19 crisis, explain a large part of the asymmetry in output loss in 2020 across countries. Pre-crisis structural and institutional factors also seem to contribute to economic resilience during the current crisis, while stronger discretionary fiscal support in 2020 is associated with lower output loss.


Hiona Balfoussia and Dimitrios P. Louzis: “The impact of economic uncertainty and inflation uncertainty on the Greek economy”

This study provides estimates of economic uncertainty and inflation uncertainty for the Greek economy and considers their time-varying impact on the corresponding macroeconomic variables, i.e. GDP growth and inflation. The authors find that, in both cases, the degree of uncertainty varies over time. Its impact on the underlying variables also fluctuates and is statistically significant and negative during both the global financial crisis and the Greek sovereign debt crisis, as well as during the COVID-19 pandemic. Thus, during these periods, uncertainty weighs on the economy’s fundamentals. The findings of the study have a number of policy implications, including that the extraordinary policy measures taken to contain the economic impact of the COVID-19 pandemic should be withdrawn gradually and with due caution, as any increase in uncertainty may have an adverse effect on economic activity and a deflationary impact on prices.


Evangelos Charalambakis: “Stock price reactions to the first wave of the COVID-19 pandemic: evidence from Greece”

This study investigates stock price performance at the industry level during the first wave of the COVID-19 pandemic in Greece. The analysis distinguishes between five periods from January to May 2020, namely the pre-incubation, incubation, outbreak, lockdown, and lockdown lift periods. The study provides evidence that industry-level stock returns witnessed their largest drop during the outbreak period. In particular, the travel and leisure, construction, telecommunications, industrial goods, real estate, technology and utility sectors had, on average, highly negative cumulative returns. The results also reveal a partial recovery in equity prices during the lockdown period, possibly due to the announcement of fiscal stimulus measures by the Greek government, along with the initiation of the ECB’s pandemic emergency purchase programme (PEPP). The telecommunications, construction, technology, and travel and leisure sectors exhibited the highest performance over that period. The study also evaluates the reaction of industry-level stock returns relative to the market index, performing an event study analysis. The empirical findings show that the utilities, telecommunications, personal goods and retail sectors experienced fewer losses compared with the market index during the outbreak period in Greece. Finally, despite the partial recovery of equity prices in the lockdown period, the results show that the basic raw materials, food and beverage, industrial goods and retail sectors underperformed compared with the market index in the short run.


Faidon Kalfaoglou: “ESG risks: a new source of risks for the banking sector”

This study is motivated by the fact that the financial sector has been mandated to support political decisions promoting sustainable development. For the banking sector, ESG (environmental, social and governance) risks constitute a new source of risks which should be identified, evaluated, monitored and managed. Given the novel nature of these risks, this is a challenging task. The purpose of this study is to clarify concepts, increase awareness and facilitate the assimilation of the regulation into the decision-making process. The first part of the study analyses the ESG themes and the transmission channels towards the traditional banking risks. The second part focuses on the initiatives that may facilitate the ESG framework to be introduced into the financial sector. The third part focuses on how banks can incorporate ESG themes into decision-making. The ambitious policy agenda in relation to sustainability requires a shifting mindset in the financial sector, in order to finance the transformation towards sustainability.

Related information:

Issue 53 also includes the abstracts of Working Papers published by the Special Studies Section of the Bank’s Economic Analysis and Research Department between January and July 2021.

Related link:

The full text of Issue 53 is available on the Bank of Greece website: Bank of Greece Economic Bulletin, Issue 53

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