Predicting the Crises of the Greek Drachma.

The paper investigates the role of fundamentals in the speculative episodes experienced by the Greek drachma during the 1990s, and examines whether the openness of the Greek economy has altered the role of fundamentals in the likelihood of a currency crisis. An interesting aspect of the empirical analysis is that the crises are related significantly to macroeconomic fundamentals of the Greek economy. The analysis shows that the openness of the Greek economy has introduced new elements and concerns in the predictability of speculative attacks on the drachma. Copyright 2002 by Blackwell Publishing Ltd