Did the euro change the effect of fundamentals on growth and uncertainty?

Luque, J.; Taamouti, A.

Abstract

We present empirical evidence on whether the introduction of the euro has changed the effect of economic fundamentals on the growth rates of euro countries’ GDPpc and GDPpc volatility. We find that there is a statistically significant structural break in the impact of increments in government debt on both economic growth and uncertainty. In particular, after adoption of the euro increments in government debt decreased growth and increased uncertainty. These results are robust to a battery of checks, including exclusion of the recent financial crisis period, comparison with non-euro European countries, and controlling for different debt/GDP ratios.

Citation

Luque, J., & Taamouti, A. (2014). Did the euro change the effect of fundamentals on growth and uncertainty?. BE Journal of Macroeconomics, 14(1), 625-660. https://doi.org/10.1515/bejm-2013-0133

• Journal Article Type: Article
• Publication Date: Aug 15, 2014
• Deposit Date: Oct 16, 2014
• Publicly Available Date: Nov 7, 2014
• Journal: BE Journal of Macroeconomics
• Electronic ISSN: 1935-1690
• Publisher: De Gruyter
• Peer Reviewed: Peer Reviewed
• Volume: 14
• Issue: 1
• Pages: 625-660
• DOI: https://doi.org/10.1515/bejm-2013-0133
• Keywords: Currency union, Euro zone, Fundamentals, GDPpc growth rate, GDPpc growth rate volatility, Government debt.
• Public URL: https://durham-repository.worktribe.com/output/1419291