Date of Award

1998

Document Type

Honors Thesis (Open Access)

Department

Colby College. Economics Dept.

Advisor(s)

Michael R. Donihue

Second Advisor

Henry A. Gemery

Abstract

The objective of this project is to use an econometric model to examine economic growth in Greece. Using a growth model to investigate a country's economy one can obtain a more complete picture of the historical growth experience of a particular country by pinpointing the underlying causes for growth and recession at particular time periods. My main objective is to thus construct a growth model for the Greek economy, which is based on Solow's theory of economic growth. Solow was one of the first economists that attempted to examine growth within an economy through the use of a well structured model that came to be known as the Solow model. The general hypothesis was that the Greek economy can be modeled successfully. I also expected to find valuable results that ultimately can be used as tools for economic policymakers. The methodology behind the model constructed was based on Mankiw, Romer and Weil's article in 1992 #A Contribution to the Empirics of Economic Growth". (Mankiw; Romer; Weil 1992) Their article provided me with a basic textbook Solow model. Although in their article Mankiw, Romer and Weil used cross-country data to test the efficiency of the model among different countries, by modifying some of the original assumptions I constructed a time-series model that I applied to the Greek economy. What this paper will show is that, overall, the methodology and Solow theory behind the work of Mankiw, Romer and Weil was found to be inappropriate for the Greek economy. Possible reasons for this, can be the fact that the Greek economy appears to have reached its steady state level for at least the last part of the period examined. Maybe it is due to the overall structure of the Greek economy or perhaps Solow's theory is just not applicable to the Greek economy. Furthermore the existing large trade deficit that the Greek economy experienced throughout the period examined is a great limitation in applying Solow's theory. In an attempt to further extent my application and understanding of Solow's theory I attempted to estimate the Solow residuals, as measures of technical change. The Solow residuals were successfully obtained using growth accounting theory.

Keywords

Greece -- Economic conditions -- 1918-1974-, Greece -- Economic conditions -- 1974-, Greece -- Economic policy -- 1918-1974, Greece -- Economic policy -- 1974-

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