Macro-Governance Aspects of Monetary Policy Accommodation Under Varying Regimes: An Assessment Using Greek Data

Abstract

This paper has a two-fold orientation; firstly, it examines the linkages and the time-series properties of a set of nominal and real macroeconomic variables in Greece, under different exchange rate systems and varying fiscal regimes. Secondly, it makes an effort to evaluate some macro-governance aspects of monetary policy performance. In essence, it measures the extent to which monetary policy has been used to accommodate foreign disturbances and fiscal policy changes. Concerning the former, prices have played a central role between nominal and real variables while verifying evidence on inflation persistence. Regarding the latter, the central bank is primarily responding, on average, to domestic rather than foreign conditions implying a non-operative monetary-transmission mechanism. In principle, the monetary authorities appear to have engaged in accommodative, and to a lesser extent sterilisation, schemes of policy action, notwithstanding the clear tendency towards systematic control, thereby suggesting consistency with the conventional priors of policy-competence hypothesis.

Keywords: Monetary Policy, BOPs, Growth, Budget Deficits, Inflation, Granger-Causality

JEL Classification: C4, E5, F0, H5