P-STAR analysis in a converging economy: the case of Greece

The paper applies the P-STAR model of inflation determination to the case of Greece by accounting for both domestic and foreign price disequilibria. Since the 1970s the Greek economy has experienced high rates of inflation, but after 1993 a systematic deflation effort started in view of the country's prospect of joining the ERM. Testing empirically the determinants of inflation becomes imperative not only in the context of understanding the deflation effort, but also in assessing the effect of future price pressures. (C) 2001 Elsevier Science B.V. All rights reserved.