The construction and testing of a macro-econometric forecasting model for the Greek economy

This thesis concerns the construction and testing of an annual forecasting econometric model for the Greek economy between 1954 and 1977. The economic structure has been broken down into several subsectors and statistical analysis has been employed to determine the main factors explaining the relationships in each subsector. The work is divided into ten chapters. After a brief introduction giving the background of the Greek economy in outline, the second chapter describes the statistical procedures employed and some of the problems encountered in econometric work, with their suggested solutions. A detailed description of the factor analysis technique is given, as this technique has been extensively employed in the Two Stage Least Squares (TSLS) and reduced form estimations. The Chapters 3-9 deal with the particular subsectors of the economy, i.e. consumption expenditure (Chapter 3), the effect of wealth on consumption (Chapter 4), the determination of investment (Chapter 5), employment, taxes (Chapter 6), international transactions (Chapter 7), wages and prices (Chapter 8) and the financial sector (Chapter 9). Each subsector has been examined in the context of economic theory and specific models have been tested to determine functions which explain the relationships in the various subsectors satisfactorily. In the last chapter all subsectors are brought together to estimate the reduced form of the structure, both as a simultaneous system and blockwise. The technique of factor analysis was employed. Orthogonal and oblique rotation of the factors were used in order to determine their differences, if any, and which one tracks the data better, in simulations within the sample period. The selected reduced form was used to generate forecasts and also to test the properties of some multipliers. A summary of the results of the whole work is finally given.