The findings of the paper point to the fact that the fixed exchange rate regimes did not operateas an effective shield of protection from currency strains and transformational recessions.

Measured against PPP, the drachma effective exchange rate was overvalued by a significant amount, implying that the devaluation on March 1998 was an adjustment of the exchange rate towards the long-run price differentials. The paper also analyses the links between fiscal policy, interest rates...