The Euro @20: How Economic and Financial “Asymmetries” Marred the Promise of the Single Currency

In this paper we review the process of European Monetary Integration since the early 1970s and the abandonment of the Bretton Woods system. In what we have cast as a drama in five acts, we first recount the quest for a European Monetary Union and document the gradual deepening of monetary cooperation among member states, through the creation of the European Monetary System. We then discuss the launch of the euro in 1999 and the euro crisis through the lens of the optimal currency area literature. The last two sections discuss whether the euro @ 20 is likely to limp along by “muddling through” or, whether the corona pandemic will usher the euro area into bold reforms to deepen the European monetary union by laying the foundations of a fiscal union. The risk of a breakup is also discussed.

Journal of Applied Corporate Finance, (Fall 2020), Volume 32, Number 4, pp. 90-104 (with Laurent Jacque)

The Clash of Central Bankers with Labour Market Insiders, and the Persistence of Inflation and Unemployment

This paper analyses the implications of monetary policy for the dynamic behaviour of inflation, in a ‘natural’ rate model characterized by endogenous unemployment persistence. We present evidence for the main industrial economies which suggests that inflation displays persistence which is of the same order of magnitude as the persistence of deviations of unemployment from its ‘natural’ rate. We provide a theoretical explanation of this fact based on a model of the dynamic interactions between central bankers and labour market insiders. The clash in the objectives of central bankers and labour market insiders is what causes both inflation and unemployment to display the same degree of persistence in this model. The analysis suggests that inflation persistence could be addressed in a welfare-improving way, if central banks adopted monetary policy rules that targeted unanticipated changes in unemployment rates instead of deviations of unemployment from its ‘natural’ rate.

Economica, 85 (2018) pp. 152-176

PDF of Accepted Manuscript


Endogenous Growth and External Balance in a Small Open Economy

This paper puts forward an intertemporal model of a small open economy which allows for the simultaneous analysis of the determination of endogenous growth and external balance. The model assumes infinitely lived, overlapping generations that maximize lifetime utility, and competitive firms that maximize their net present value in the presence of adjustment costs for investment. Domestic securities are assumed perfect substitutes for foreign securities and the economy is assumed small in the sense of being a price taker in international goods and assets markets. It is shown that the endogenous growth rate is determined solely as a function of the determinants of domestic investment, such as the world real interest rate, the technology of domestic production and adjustment costs for investment and is independent of the preferences of domestic households and budgetary policies. The preferences of consumers and budgetary policies determine the savings rate. The current account and external balance are functions of the difference between the savings and the investment rates. The world real interest rate affects growth negatively but has a positive impact on external balance. The productivity of domestic capital affects growth positively but causes a deterioration in external balance. Population growth, government consumption and government debt affect the current account and external balance negatively, but do not affect the endogenous growth rate.

Open Economies Review, (2014), 25, pp. 571-594DOI 10.1007/s11079-013-9290-8

PDF of Accepted Manuscript

Curriculum Vitae (CV)

Portrait GA 044

Current Positions

Professor of Economics at the Athens University of Economics and Business (since 1990).

Head of the Department of Economics (since 2020).

Research Associate of the Hellenic Observatory of the London School of Economics and Political Science (since 2011).

Fellow of the European Economic Association (EEA) (since 1999).

Born in Athens, Greece in 1955, married with three adult children.

Past Professional Experience

  • Constantine Karamanlis Professor of Hellenic and European Studies at the Fletcher School of Law and Diplomacy, Tufts University (September 2016 – September 2019).
  • Member of the Hellenic Parliament (elected September 1996 – October 2009). 
  • Minister of Economy and Finance of the Hellenic Republic and Greece’s representative at the Eurogroup and the ECOFIN Council (March 2004 – January 2009).
  • Member of the Council of the European Economic Association (Elected for the period 1994 – 1998).
  • Chairman of the Council of Economic Advisors of Greece (1992-1993).
  • Reader (Associate Professor) in Economics at Birkbeck College, University of London (1988-1992).
  • Lecturer (Assistant Professor) in Economics, Birkbeck College, University of London (1984-1988).
  • Research Fellow, Centre for Economic Policy Research (CEPR) (1985-1999).
  • Research Fellow at the Centre for Labour Economics of the London School of Economics (1981-1982)
  • Part-time consultant to a number of international institutions, including the European Commission and the World Bank.


  • BSc (1977) in Economics from the University of Athens (First Class).
  • MSc (1978) in Economics from the London School of Economics and Political Science (LSE).
  • PhD (1981) in Economics from the London School of Economics and Political Science (LSE).

Awards and Honours

  • 1981 Sayers Prize of the University of London for distinguished doctoral dissertations in monetary economics, awarded for his 1981 PhD dissertation Monetary Policy and Aggregate Supply under Rational Expectations (supervised by George Akerlof, Steve Nickell and Chris Pissarides).
  • 2002 Annual Prize of the Academy of Athens for his  book (with Sophia Lazaretou), The Drachma: From the Phoenix to the Euro, a monetary and economic history of Greece since the 19th century.
  • 2019 Certificate of Achievement Award from Economica, for the paper ‘The Clash of Central Bankers with Labor Market Insiders, and the Persistence of Unemployment and Inflation’ (January 2018), as the most downloaded recent paper published in Economica, between January 2017 and December 2018.

Research and Teaching

Research and teaching focuses on international macroeconomics, inflation and unemployment, economic growth, exchange rate regimes, monetary and fiscal policy and the European and Greek economies.

Has published five books and over 40 papers in academic journals, such as the American Economic Review, the Journal of Political Economy, the Economic Journal, the European Economic Review, the Journal of Monetary Economics, the Journal of Money, Credit and Banking, Economica, Economic Policy and others.

Dynamic Macroeconomics, an advanced graduate textbook, was published in December 2019 by MIT Press.

Key Publications in Academic Journals

“The Labour Market in an Equilibrium Business Cycle Model”, Journal of Monetary Economics, 11 (1983), pp. 117-28.

“On Intertemporal Substitution and Aggregate Labour Supply”, The Journal of Political Economy, 95 (1987), pp. 938-60.

“Wage Setting and Unemployment Persistence in Europe, Japan and the USA” (with Alan Manning), European Economic Review, 32 (1988), pp. 698-706. 

“The Phillips Curve, the Persistence of Inflation and the Lucas Critique: Evidence from Exchange Rate Regimes” (with Ron Smith), American Economic Review, 81 (1991), pp. 1254-75.

“Monetary Accommodation, Exchange Rate Regimes and Inflation Persistence”, Economic Journal, 102 (1992), pp. 461-80.

“Money and Endogenous Growth” (with Rick van der Ploeg), Journal of Money, Credit and Banking, 26 (1994), pp. 771-91.

“The Two Faces of Janus: Institutions, Policy Regimes and Macroeconomic Performance in Greece”, Economic Policy, 10 (1995), pp. 147-92.

“Endogenous Growth and External Balance in a Small Open Economy”, Open Economies Review, 25, (2014), pp. 571-594.

“The Clash of Central Bankers and Labor Market Insiders, and the Persistence of Inflation and Unemployment”, Economica, 85, (2018), pp. 152-176.

Detailed CV in PDF

Exchange Rate Regimes, Inflation and Credibility: Evidence from Greece

We investigate how exchange rate regimes affect the anti-inflationary credibility of monetary policy in Greece. The evidence suggests a positive impact of a fixed exchange rate regime to anti- inflationary credibility.

(with Philippopoulos A. and V. Vassilatos), in Korres, G.M. and Bitros, G.C. (eds.) Economic integration: Limits and prospects. Palgrave, Houndmills (2002).

This book is intended to provide a basic understanding of current issues and problems of economic integration. Identifying economic integration as one of the main features of modern international economics, the authors examine many aspects and consequences of economic integration which remain obscure and unexplored. After addressing general issues regarding with economic integration, the authors include empirical and theoretical analyses of the monetary union, social policy reform, social union, a public finance, and technological policies.

The Bank of Greece and Inflation: Independence and Democratic Accountability

This paper deals with the question of central bank independence and inflation control, with special reference to the Bank of Greece. After a brief discussion of the history of the Bank of Greece, it surveys current theories of inflation and the literature on the role of the anti-inflationary credibility of monetary policy. It then proceeds to define economic and political independence, with special reference to the problem of inflation and democratic accountability. It concludes that as a result of reforms in the early 1990s the Bank of Greece is already by and large economically independent. However, more needs to be done to make it politically independent as well. The paper suggests the directions of a political initiative to grant political independence to the Bank of Greece.


in Demopoulos G.D., Korliras P.G. and Prodromidis K.P. (eds), Essays in Economic Analysis (in Honor of Professor Theocharis), Athens, Sideris.

Exchange-Rate Regimes, Political Parties and the Inflation-Unemployment Tradeoff: Evidence from Greece

We use Greek data during 1960–1994 to test and estimate a model in which wage inflation, price inflation and unemployment depend on the exchange rate regime, the identity of the political party in power and whether an election is expected to take place. We respect the Lucas critique and take into account the statistical properties of the data. The main results are: (i) The exchange rate regime matters for inflation. After the fall of the Bretton Woods regime in 1972, there is a Barro-Gordon type inflation bias due to the inability of all policymakers to precommit to low inflation. (ii) There are no Barro-Gordon type partisan differences in inflation or unemployment.

Open Economies Review, (1998), Vol. 9, pp. 39–51 (with Dong-Ho Lee and Apostolis Philippopoulos)

Full Paper PDF

The Euro, the Dollar and the International Monetary System

In this paper we analyze the changes in the fundamentals of the international monetary system following the introduction of the euro, as well as the likely transition scenario to the new world monetary equilibrium. We suggest that the introduction of the euro will bring about potentially important changes in the international monetary scene, as the euro will substitute to a large extent for the dollar as an international means of payments, unit of account and store of value. Such changes in the fundamentals will bring about an increased demand for euros shortly after the introduction of the new currency in international markets.

The first manifestation of the increased demand for euros will be an appreciation of the new currency against the US dollar and the yen. If the euro does challenge the dollar’s hegemony, this is likely to be a cause of instability in the international monetary system, which appropriate policy coordination could potentially mitigate.


in Paul R. Masson, Thomas H. Krueger and Bart G. Turtelboom (eds), EMU and the International Monetary System, Washington D.C., International Monetary Fund (with Richard Portes).

The Two Faces of Janus: Institutions, Policy Regimes and Macroeconomic Performance in Greece

The clear change in policy regime in Greece around 1974 offers an opportunity to assess the extent to which economic performance depends on institutional underpinnings. For twenty years up to 1974, Greece enjoyed rapid growth, high investment and low inflation; during the next twenty years, growth and investment collapsed and inflation became high and persistent.

I describe the political background to such clear institutional change, and the nature of the two economic regimes: the first providing coordination and commitment mechanisms to sustain adequate returns for high investment, the second failing to do so. The same change in political climate after 1974 raised public sector deficits and debt, fuelling a trade deficit and monetary expansion. Entry to the EC did not cause the economic slowdown in Greece, but transfers from the EC did mask the underlying problem, delaying necessary adjustment. Recent attempts to reverse Greece’s fortunes are in the right direction but as yet inadequate.

Economic Policy, Vol. 10, No. 20. (Apr., 1995), pp. 147-192

Full Article in PDF.