The Pattern of Financial Crises in Greece＇ A Historical Perspective

The main goal of this paper is to trace the long record of financial crises from the perspective of an emerging economy. Two questions are addressed. First, what explains the incidence and severity of financial crises in an emerging market economy？ And, second, what is the role of learning; how does the country learn from its past experience in financial crises to improve institutions and develop better techniques so as to successfully manage successive crisis events？ To the best of our knowledge, this is the first attempt to provide a crisis event taxonomy looking at a systematic categorisation of the crises episodes that the country experienced over its 200-year life span, from its independence and the foundation of the Modem Greek state in 1829 to the recent 2008 crisis. To answer the above questions, I first present evidence on financial crises in Greece over a long time span of two centuries. Greece is chosen as our working template since it is a country with a rich history in financial crises. In particular, we try to identify different varieties of crises events, providing thus a crisis chronology. Moreover, we present some stylised facts on the incidence, the frequency and the severity of crises events. And second, we discuss the key determinants of the crises episodes, closely related to country specific factors, such as credit expansion, fiscal imbalances and the limited reserve coverage of the monetary base.

The Role of Collateral in Sudden Stop Models

This paper examines the role of collateral in sudden stop models that feature occasionally binding constraints and endogenous growth.It shows how different assumptions regarding the nature and valuation of collateral alter the dynamics of crisis episodes and the welfare costs of pecuniary externalities.For example,in a model with land as collateral,valuing collateral at the“expected future price”leads to substantially weaker Fisherian deflation efects than the case with collateral valued at the“current price.”However,the average size of sudden stops in the two economies are similar because households endogenously avoid the region where large sudden stops would occur.The differences between different collateral valuations and the size of sudden stops are amplified when we abstract from endogenous growth.In another case,assuming collateral is income rather than land leads to smaller sudden stops as income is less volatile than asset prices.Finally,we show that some choices lead to constrained or conditionally eficient allocations whereas others generate inefficiencies,but these inefficienciesare small.