Authors: Pantelis Kostis

Title: Winners and Losers: The Recovery of the Greek Retail Trade after Uncertainty Shocks

Abstract

The paper aims to examine whether uncertainty is a critical factor in the economy's retail trade, especially in the wake of the recent global financial crisis. For this purpose, through the construction of a monthly uncertainty index for the Greek economy, based on stock market data, the effects of uncertainty on the retail trade and the sub-sectors of the retail trade for the period from 2001 to 2022 (monthly data) are examined. The main hypothesis examined in this paper is that increasing confidence in the Greek economy leads to a reduction in retail turnover. The paper aims to examine whether uncertainty is a critical factor in the economy's retail trade, especially in the wake of the recent global financial crisis. For this purpose, through the construction of a monthly uncertainty index for the Greek economy, the effects of uncertainty on the retail trade and the sub-sectors of the retail trade for the period from 2001 to 2019 (monthly data) are examined. Through the empirical analysis, using a vector self-regression model (VAR), the effects of a shock of uncertainty on the turnover of the retail trade and its industries for a period of 12 months after the outbreak of the shock are highlighted. The analysis shows that a negative relationship between rising uncertainty and retail turnover. However, there are retail sectors that are most affected by uncertainty and others that are less or not affected at all. The greatest effects are observed in car fuels and lubricants, in department stores, in books, stationery and other items. Also, the uncertainty does not seem to affect the pharmaceutical and cosmetics sector and other stores (excluding fuel). At the same time, the direction of the relationship between the uncertainty and the turnover of the retail trade differs between the different branches of the retail trade. So there are retail sectors in which an uncertainty shock: a) reduces turnover in the first months after the shock (fuel and lubricants, furniture-electrical appliances-home appliances, out-of-store sales) while turnover seems to be returning at the initial level 10-12 months after the shock, and b) increases the turnover in the first months after the shock (department stores, books-stationery-other items, food, food-beverages-tobacco) while the turnover seems to returns to baseline or decreases 4-8 months after the onset of uncertainty shock.