The Economic Implications of a Greek Default

A lot of media attention has recently been focusing on the potential for a Greek default and exit from the Eurozone, and last Tuesday night Greece failed to repay its IMF loan, becoming the first developed country to default with the IMF. Last Sunday Greece also imposed capital controls to prevent capital flight from occurring. Capital flight is the situation whereby residents and firms move money out of a country because they are scared that they will otherwise lose it. This may be due to government taxation, requisition (some Cypriots who had money deposited with banks lost 25% which was taken by the government through an emergency tax in 2013) or fear of bank collapse. [...]