NO. 160. FISCAL CYCLICALITY, WAR AND BANKRUPTCIES IN GREECE, 1833-1939

Chr. Chrysanthakopoulos, Fr. Koutentakis, Ath. Tagkalakis. 2024.

Using a novel historical dataset of Greek public finances from 1833 to 1939, we investigate the cyclical behavior of public spending, tax buoyancy, and the impact of political transformations, wars and bankruptcies in Greece. Our findings indicate that territorial expansions increased public spending cyclicality, resulting in a deficit and debt bias

Tax buoyancy declined until the early 20th century but improved from the 1920s onward. Poor initial fiscal conditions and enhanced democratic quality mitigate pro-cyclical spending and boost tax revenue buoyancy. Both war and bankruptcy episodes significantly elevated the debt-service to-GDP ratio and reduced economic activity in the medium-term.

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