Greece

Greece struggled for many years to operate either exchange rate or monetary targets, with a primary focus on economic growth, but policy shifted towards price stability in the 1990s, financial reforms made monetary control more effective and a hard drachma policy from 1995 allowed Greece to enter EMU in 2001.

Years Targets and attainment Classification
1974-90 exchange rate pegged to USD 1974-5 then to currency basket, with frequent changes to currency basket; heavily managed float from April 1978 focused on competitiveness and/or inflation, including 1983 seven month peg to USD (86?); monetary policy aimed at growth and competitiveness as well as stabilisation, operated at first largely via selective credit controls, regulated sector-specific lending rates and reserve requirements, but some liberalisation of interest rates towards end of period; monetary targets 1975-90 overshot or undershot by wide margins 13 years out of 16; continuing and significant fiscal dominance; stabilisation programme under IMF supervision 1986-87, but policy reverts rapidly to concern with growth; unstructured discretion UD
1991-94 non-accommodating exchange rate policy (depreciation less than inflation differential); financial sector reforms bring rise in non-monetary financing of budget deficits; monetary policy increasingly focused on inflation and shifting towards indirect instruments; monetary targets undershot 1991, overshot 1992 and 1993, hit 1994; recurring fiscal dominance issues loosely structured discretion LSD
1995-2000 hard drachma policy geared to price stability, with pre-announced crawl 1995 slowing to zero by 1997, devaluation 1998 on entry to ERM, then exchange rate allowed to appreciate outside narrow bands; monetary targets downgraded but largely attained; interest rates become main monetary instrument; central bank independence 1997 ERwMT
2001-14 membership of European Monetary Union currency union CU

Selected IMF references: RED 1978 pp41-2, 76-7; RED 1983 pp55-9; RED 1984 p85; RED 1986 pp42-3, 58-9; RED 1989 pp79-86, 116-17; RED 1990 pp44-50, 73-4; SR 1990 pp2-4; RED 1993 pp16, 23-4; BD 1994 pp17-18, 20-1; SR 1994 pp2-5, 10-11; BP 1995 pp46-7; SR 1996 pp6-7, 11-12.

Additional sources: Houben (2000, especially pp230-32, 310-11); Garganas and Tavlas (2001).

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