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Essays on the political economy of the Eurozone and Greek

Ganem, Simon (2020) Essays on the political economy of the Eurozone and Greek. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.00004284


This dissertation is about the Eurozone and Greek crises of the 2010s, comprising of three papers, an introduction and a conclusion. The three papers respectively analyse the political, financial and economic dimensions of the crises. Paper 1 shows that double-sided incomplete information is a necessary condition for explaining the bargaining dynamics and outcome of the third Greek bailout negotiations. Our model also demonstrates that the outcome of the negotiations was not that predictable. Finally, the Greek policy-makers could have been more aggressive to increase their chance of obtaining a better deal. Paper 2 then investigates the effect of political uncertainty on Greek sovereign spreads between October 2009 and July 2012. We thus create a dataset comprising of more than 5800 news items covering most policy debates prevailing at that time and that are manually coded along several dimensions, in particular as expected or unexpected policy developments. The results using an EGARCH(1,1) specification suggest that financial markets reacted strongly to unexpected positive policy developments but remained, on the whole, more sensitive to negative developments in line with existing findings. Finally, paper 3 studies the role played by uncertainty in the protracted slump of investment following the Great Recession and Eurozone crisis. Since existing volatility-based proxies for uncertainty may discount uncertainty shocks coming from the left tail, we create a proxy for disaster risk building on the Growth-at-Risk approach. Using Bayesian VAR models on a panel of 12 advanced economies from 1997Q1 to 2019Q3, we find no conclusive effect of disaster risk shocks on investment.

Item Type: Thesis (PhD)
Additional Information: © 2020 Simon Ganem
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
J Political Science > JN Political institutions (Europe)
Sets: Departments > European Institute
Supervisor: De Grauwe, Paul and Monastiriotis, Vassilis

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