The Analytics of the Greek Crisis

Pierre-Olivier Gourinchas, Thomas Philippon, Dimitri Vayanos

NBER Working Paper No. 22370
Issued in June 2016, Revised in July 2016
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, International Trade and Investment, Monetary Economics

We provide an empirical and theoretical analysis of the Greek Crisis of 2010. We first benchmark the crisis against all episodes of sudden stops, sovereign debt crises, and lending boom/busts in emerging and advanced economies since 1980. The decline in Greece’s output, especially investment, is deeper and more persistent than in almost any crisis on record over that period. We then propose a stylized macro-finance model to understand what happened. We find that a severe macroeconomic adjustment was inevitable given the size of the fiscal imbalance; yet a sizable share of the crisis was also the consequence of the sudden stop that started in late 2009. Our model suggests that the size of the initial macro/financial imbalances can account for much of the depth of the crisis. When we simulate an emerging market sudden stop with initial debt levels (government, private, and external) of an advanced economy, we obtain a Greek crisis. Finally, in recent years, the lack of recovery appears driven by elevated levels of non-performing loans and strong price rigidities in product markets.

download in pdf format
   (1238 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22370

Published: The Analytics of the Greek Crisis, Pierre-Olivier Gourinchas, Thomas Philippon, Dimitri Vayanos. in NBER Macroeconomics Annual 2016, Volume 31, Eichenbaum and Parker. 2017

Users who downloaded this paper also downloaded* these:
Reinhart and Trebesch w21664 The Pitfalls of External Dependence: Greece, 1829-2015
Gourinchas, Philippon, and Vayanos The Analytics of the Greek Crisis
Brunnermeier Comment on "The Analytics of the Greek Crisis"
Cole, Neuhann, and Ordoñez w22330 Debt Crises: For Whom the Bell Tolls
Farhi and Maggiori w22295 A Model of the International Monetary System
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us