Why is the Greek economy collapsing? A simple tale of high multipliers and low exports

Friday, 21 December 2012
Downloaded 3,215 times

In an attempt to understand why the Greek economy is collapsing, this Commentary points out two key aspects that are often overlooked – the country’s large multiplier and a bad export performance. When combined with the need for a large fiscal adjustment, these factors help explain how fiscal consolidation in Greece has been associated with such a large drop in GDP.

Cinzia Alcidi is LUISS Research Fellow at CEPS and Daniel Gros is Director of CEPS.