Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area

Yu-Fu Chen, Michael Funke

    Research output: Working paper

    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 regimeswitching 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.
    Original languageEnglish
    Place of PublicationGermany
    PublisherCESifo Group Munich
    Pages1-26
    Number of pages26
    Publication statusPublished - 23 Dec 2015

    Publication series

    NameCESifo Working Paper
    No.5677
    ISSN (Electronic)2364-1428

    Keywords

    • Greece
    • currency crisis
    • euro
    • financial assistance programmes

    Fingerprint Dive into the research topics of 'Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area'. Together they form a unique fingerprint.

  • Cite this

    Chen, Y-F., & Funke, M. (2015). Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area. (pp. 1-26). (CESifo Working Paper; No. 5677). CESifo Group Munich.