Bank of Greece publishes Economic Bulletin Issue 60 featuring research on inflation drivers, FDI statistics and Greece’s potential output

The Bank of Greece published Economic Bulletin Issue 60 (December 2024), presenting three research articles on euro area inflation dynamics, the compilation of foreign direct investment statistics, and the methodology used to estimate and forecast Greece’s potential output and output gap. The bulletin notes that the articles reflect the authors’ views and not necessarily those of the Bank of Greece. On inflation, a DSGE analysis finds that higher real wage rigidity can lead to higher and more persistent inflation following import price shocks, alongside weaker employment and output, due to greater pass-through of input costs to final prices. Case studies for the euro area and Greece link the post-2021 rise in domestic inflation mainly to higher profits, with labour costs contributing less, and identify services as the primary driver of profit increases in Greece. On FDI, a second article describes the Bank of Greece’s annual FDI survey methodology and processing, aligned with the OECD Benchmark Definition of Foreign Direct Investment (BMD4), and reports results on FDI stocks by partner country and economic activity, including ultimate controlling economies and investment chains. On potential output, a third article outlines the Bank of Greece’s production-function approach and medium-term projections, with potential output growth expected at 1.9% supported by total factor productivity and capital, while demographics are expected to weigh on productive capacity and TFP becomes the main contributor by the end of the projection horizon. Issue 60 also includes abstracts of working papers published by the Special Studies Division between August and December 2024.