TY - JOUR AU - Gourinchas, Pierre-Olivier AU - Philippon, Thomas AU - Vayanos, Dimitri TI - The Analytics of the Greek Crisis JF - National Bureau of Economic Research Working Paper Series VL - No. 22370 PY - 2016 Y2 - June 2016 DO - 10.3386/w22370 UR - http://www.nber.org/papers/w22370 L1 - http://www.nber.org/papers/w22370.pdf N1 - Author contact info: Pierre-Olivier Gourinchas Department of Economics University of California, Berkeley 530 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0720 Fax: 510/642-6615 E-Mail: pog@econ.berkeley.edu Thomas Philippon New York University Stern School of Business 44 West 4th Street, Suite 9-190 New York, NY 10012-1126 Tel: 212/998-0490 Fax: 212/995-4233 E-Mail: tphilipp@stern.nyu.edu Dimitri Vayanos Department of Finance, OLD 3.41 London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: +44 (0)20 7955 6382 Fax: +44 (0)20 7955 7420 E-Mail: d.vayanos@lse.ac.uk M1 - published as Pierre-Olivier Gourinchas, Thomas Philippon, Dimitri Vayanos. "The Analytics of the Greek Crisis," in Martin Eichenbaum and Jonathan A. Parker, editors, "NBER Macroeconomics Annual 2016, Volume 31" University of Chicago Press (2017) AB - We provide an empirical and theoretical analysis of the Greek Crisis of 2010. We first benchmark the crisis against all episodes of sudden stops, sovereign debt crises, and lending boom/busts in emerging and advanced economies since 1980. The decline in Greece’s output, especially investment, is deeper and more persistent than in almost any crisis on record over that period. We then propose a stylized macro-finance model to understand what happened. We find that a severe macroeconomic adjustment was inevitable given the size of the fiscal imbalance; yet a sizable share of the crisis was also the consequence of the sudden stop that started in late 2009. Our model suggests that the size of the initial macro/financial imbalances can account for much of the depth of the crisis. When we simulate an emerging market sudden stop with initial debt levels (government, private, and external) of an advanced economy, we obtain a Greek crisis. Finally, in recent years, the lack of recovery appears driven by elevated levels of non-performing loans and strong price rigidities in product markets. ER -