Causes and Consequences of the Greek Current Account Crisis and Estimates of the Current Account Balance
Derrera, Zachary J, 1995--
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In this paper I examine the role Greece has played in the recent global financial crisis, specifically as it relates to their own current account predicament. I will identify the causes of the Greek debt crisis, as well as analyze empirically several main components of the decline in the current account. I will also put to use some basic econometric models to forecast potential long-run outcomes of the situation. Greece has been at the forefront of the global financial crisis since it became evident in 2009 that the country’s public debt was not sustainable. In the years leading up to the global recession, Greece borrowed heavily to finance the government budget. However, because of weak enforcement of revenue collection, inflexible economic structures and a number of other issues, the debt began to accumulate. In addition, the European Union’s (EU) weak enforcement of rules concerning deficit ceilings has also contributed to what has become a serious sovereign debt crisis involving other Eurozone countries. After several attempted bailouts by the EU and IMF, numerous other rescue plans have been proposed, all with varying degrees of success. I will study these policy adjustments to identify the potential consequences the Greek crisis will have on other Eurozone countries, the United States, and the rest of the world.