We use a statistical technique that solves the omitted variables problem of regression analysis to estimate the changes in gross domestic product (GDP), unemployment, and inflation of a one-unit change in government spending, exports, and interest rate for Greece using quarterly data from 1995 to 2016. Our primary findings are (1) driving the Greek economy using domestic demand creates a much more stable economy than trying to drive the Greek economy using exports and (2) cutting government spending and exports damage GDP more than equal increases help GDP. Both of these conclusions imply that IMF austerity and IMF support of exporting over domestic demand are counter-productive. Our results are not opposed to naturally occurring globalization, they are contrary to artificially encouraging trade as coerced by the IMF.
- efficacy of government policy
- Greek crisis
- omitted variables
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)