Austerity bitchslap!






Just messing around...

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The myth of internal devaluation and of competitiveness after Grexit (also in Greek)

Perhaps, I am seeing things the wrong way, but here is my thought: Following the 5th review of the IMF  and Athanasoglou (2011, Chart4, p.11)  on "The role of product variety and  quality and of domestic supply in foreign trade"  it is more than obvious that Greek firms are the largest importers. That is to say, Greece imports, heavily, factors of production other than labor. So, if Greece's non-labor production factors come from abroad, their prices are, also, set abroad... Therefore, the Greek firms may find it rather difficult to reduce their costs - no matter how labor cost might (?) be reduced - since the non-labor costs are set abroad. With firms finding difficult to reduce their costs, they will, subsequently, find it difficult to reduce their prices. This is a reason why prices did not deflate as wages did, so far, and why the the trade balance ameliorated mostly by the reduction of imports following the contraction of income and economic ...
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The good, the bad and... the austeritist!

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