Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128377
Authors: 
Chen, Yu-Fu
Funke, Michael
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5677
Abstract: 
Against the backdrop of the Greek three-act tragedy, we present a theoretical framework for studying Greece’s recent debt and currency crisis. The model is built on two essential blocks: first, erratic macroeconomic policymaking in Greece is described using a stochastic regime-switching model; second, the euro area governments’ responses to uncertain macroeconomic policies in Greece are considered. The model’s mechanism and assumptions allow either for a Grexit from the euro area or, conversely, the avoidance of Greece’s default against its creditors. The model also offers useful guidance to understand key drivers of the long-winded negotiations between the Syiza government and the euro area governments.
Subjects: 
Greece
currency crisis
euro
financial assistance programmes
JEL: 
F34
F45
H63
Document Type: 
Working Paper

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