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