| The purpose of this dissertation is to examine the structural composition of the Balance of Payments of Greece in the context of an economy wide econometric model. The chronic deficits in the Balance of Payments are rooted in the incompatibility between output demanded (tradeables) and output supplied (non-tradeable). Growing investments in the non-tradeable sector (chiefly construction and services) are shown to hurt the country's foreign exchange generating capacity by simultaneously increasing the demand for imports and decreasing the supply of exports.;This dissertation is divided into four chapters. Chapter 1 outlines the chief characteristics of the Greek economy since the early sixties. Chapter 2 develops the theoretical foundations of the estimated model, while chapter 3 presents the estimated results. Chapter 4 simulates the base solution of the model and presents the results of different policy options such as: a devaluation, an increase in the money supply, an increase in investment in the non-tradeable sector, and a similar increase in the tradeable sector; an increase in the price of foreign goods, and lastly, an increase in the price level of imports combined with a devaluation.;Investment in the non-tradeable sector contributed to increased migration since the low productivity of this sector prevented real wages from rising as fast as foreign wages. This persistent wage differential limited the potential for further exports by reducing the supply of labor and reducing effective domestic demand. Emigration partially offset the negative consequences of this type of investment on the Balance of Payments by generating significant foreign exchange through remittances, but at the same time, Greece's dependence on foreign demand and income abroad increased. |
