Since each news outlet says something about Greece these days, I wonder what serious economic research backs decisions made over the last seven years?

The IMF papers on austerity, both early ones and revisions (such those by Blanchard), are relevant here, but Greece now faces a more specific choice: a hypothetical default and introduction of a new currency. (Economics aside: Yes, maybe Greece isn't considering this choice right now and just negotiates with creditors.)

The default is relatively boring: The country stops paying off the debt, belonging mostly to the EU sovereigns, and then restructures it on different conditions. No idea how much of the debt will be written off in the end.

The impact of the new currency is more interesting because the Greek government will no longer depend on the ECB. It can now reduce real wages with devaluation. So, employment increases and the economy gradually returns to its potential GDP level.

But I didn't locate the research that would carefully model these counterfactuals under plausible assumptions. Did you?

  • $\begingroup$ I am not sure accurate modelling is possible because a lot of payment obligations depend on political decisions. Any model would have to deal with scenarios. $\endgroup$
    – Giskard
    Jul 2, 2015 at 8:47
  • $\begingroup$ @denesp Sure. Btw, here're some clues: theguardian.com/business/2015/jun/30/… $\endgroup$ Jul 2, 2015 at 11:14


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