ABSTRACT
This chapter presents a dynamic computable general equilibrium of the Greek economy and its use in the analysis of public deficit reduction policies under different marketclearing regimes and financial system closures. The model is a large-scale econometrically estimated system that incorporates an IS-LM closure, allows for different market regimes and involves multiple sectors. Six public policy measures are analysed under three cases of structural adjustments, concerning the labour market and the exchange rate regimes. The measures are all found to contribute to the reduction of the deficits in both the public budget and the current account, while inducing positive growth effects and triggering a deflationary process. Rigid market-clearing regimes weaken the effects and sometimes have adverse effects. The measures are found to differ in effectiveness, as well as in wealth distribution by economic agent.
