Date of Award
1-1-2024
Document Type
Dissertation
Degree Name
Ph.D. in Economics
First Advisor
Joshua Hendrickson
School
University of Mississippi
Relational Format
dissertation/thesis
Abstract
This dissertation includes two projects, one on the Greek debt crisis and the other on the welfare in the Lucas natural rate model.
The first chapter discusses the origin of Greek debt crisis. The Greek debt crisis stands out as a compelling case study of a severe financial crisis in a developed country within a currency zone. Despite the abundance of literature on the subject, the significance of debt accumulation in the 1980s is often overlooked, and details are frequently omitted. Through an analysis of data gathered from Greek government’s public finance statistical yearbooks spanning from 1962 to 2008, I uncovered that the Greek government utilized both domestic and foreign loans to fund investment programs starting in 1957. Additionally, loans were employed to finance a significant increase in current expenditure from 1981 onward. Both the cointegration test and fiscal reaction function test not only confirm that the Greek government debt deviates from the ad hoc sustainability requirement between 1957 and 2008 but also indicate that this deviation was evident since 1974.
The second chapter proposes a simple model to discuss the surprising welfare implications of Lucas’ natural rate island model. Previous literature includes, not only imperfect information about the current period’s real and nominal disturbances, but also uncertainty about the future. This paper only keeps the contemporary disturbances and shows, intuitively, how imperfect information about these shocks can affect expected output and social welfare in surprising ways. Our simpler model shows that random monetary policies, which obscure some information about relative prices, can outperform a constant monetary growth rule which allows agents to respond to relative prices.
Recommended Citation
Yang, Liandong, "Essays on the Greek Debt Crisis and the Welfare Paradox in the Lucas Natural Rate Model" (2024). Electronic Theses and Dissertations. 2989.
https://egrove.olemiss.edu/etd/2989