Austerity, Assistance and Institutions: Lessons from the Greek Sovereign Debt Crisis

This paper studies the Greek sovereign debt crisis in aftermath of 2007-8 global financial looking for barriers to, and engines of, growth. The vehicle is a calibrated medium-scale micro-founded macroeconomic model. Departing from 2008, our simulations show that adopted economic adjustment program (the fiscal austerity mix combined with monetary assistance provided by EU, ECB IMF), jointly observed deterioration institutional quality degree protection property rights) can explain most (around 22% GDP) cumulative loss GDP data 26% between 2008 2016. In particular, fall around 12%, while rights accounts another 10%. Counterfactual simulations, on other hand, this could have been 9% only, if country had followed different policy mix; product marker liberalization was closer to core euro zone countries; and, above all, Greece simply remained at its pre-crisis level. On absence official bailouts, depression would be much deeper, while, accommodative role played quantitative policies has vital economy. These results useful face ongoing covid-19 crisis.