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Currency Devaluation, External Finance and Economic Growth: A Note on the Greek Case

Mariolis, Theodore (2013): Currency Devaluation, External Finance and Economic Growth: A Note on the Greek Case.

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Abstract

This paper combines dynamic input-output price models with Thirlwall’s extended model of balance of payments constrained growth to estimate the effect of a switch to drachma on domestic income. The findings suggest that a return to national currency would not necessarily deepen the recession, although a rather large nominal devaluation, i.e. in excess of 57%-60%, is necessary for the recovery.

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