Structural Adjustment and Public Deficit: A Computable General Equilibrium Modelling Analysis for Greece Pantelis CAPROS (*) and Pavlos KARADELOGLOU (**) (*) National Technical University of Athens, (**) Bank of Greece Address for Correspondence: NTUA, Patission 42, 10682 Athens, Greece, tel. & fax 301-3843722 Abstract The paper presents a dynamic computable general equilibrium of the Greek economy and its use in the analysis of public deficit reduction policies under different market clearing regimes and financial system closures. The model is a large-scale econometrically estimated system that incorporates an IS- LM closure, allows for different market regimes and involves multiple sectors. Six public policy measures are analysed under three cases of structural adjustments, concerning the labour market and the exchange rate regimes. The measures are all found to contribute to the reduction of the deficits in both the public budget and the current account, while inducing positive growth effects and triggering a deflationary process. Rigid market clearing regimes weaken the effects and sometimes have adverse effects. The measures are found to differ in effectiveness, as well as in wealth distribution by economic agent. 1. Introduction Within the empirical macroeconomic analysis field, the emerging stream is based on the computable general equilibrium (CGE) approach, which has significantly progressed in the last decade, mainly motivated by the World Bank. Despite this progress, the CGE approach has hardly be present in industrialised countries and especially in Europe and CGE models have been limited to developing