Testing the credibility of stabilization programmes. Evidence from Greece

This paper tests the size and the diffusion effect of the credibility factors of the stabilization programme implemented in Greece in 1985, by means of a two‐step procedure which focuses on the analysis of the time‐series properties of the parallel market premium and the inflation process. An interesting aspect of the analysis is the evidence that the stabilization plan gained credibility rapidly, and its impact on the inflation dynamics was significant. Copyright © 2000 John Wiley & Sons, Ltd.