A Model to Deal with Aggregate Supply and Demand Imbalances: The Case of Greece

The effort to achieve the convergence criteria and the participation in the euro zone has coincided with a period of high, domestic-demand led growth in the Greek economy, continuing fiscal imbalances, a booming current account deficit, and relatively high unemployment. The economy needs rebalancing both on the demand and the supply sides. A model of aggregate supply and demand is constructed to show certain aspects of this rebalancing.