17 May 2016
at 10.30–11.30

Michael Funke (Hamburg University)
Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area

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.

BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
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Seminars will be held on Tuesdays at 10.30-11.30 unless otherwise indicated.
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