Estimating a small scale macroeconometric model of Greece

Abstract

This thesis concerns estimating a macroeconometric model of Greece. The model that is going to be estimated is based on the existing GRMOD of Professor Dimitrios Malliaropulos. It consists of 25 estimated equations, plus 7 estimated equations belonging in the model of the Eurozone, and 31 identities (and a minimized equation). There are 15 exogenous and 74 endogenous variables for both models, 59 of which belong to GRMOD (time trend and dummies are not included). Most of the model has remained unchanged, and it will simply be reestimated in order to be updated. There are, however, extensive modifications in the equations that model the monetary sector and the exchange rate sector of the economy, because of the monetary union, of which Greece is a full member from January 2001 onward. This structural change rendered the respecification of these two sectors imperative, and led to the estimation of a small model for the Economic and Monetary Union (EMU), so that the inclusion of a monetary policy reaction function in a form of a Taylor rule becomes feasible.