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Did the Euro Change the Effect of Fundamentals on Growth and Uncertainty?

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  • Taamouti, Abderrahim
  • Luque, Jaime

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 the effect of increments in debt on economic growth exhibits a structural break in 1999. A robustness check attributes this break to the financial crisis, however. There is also a statistically significant structural break in the impact of increments in government debt on economic uncertainty. This result is robust to a battery of robustness checks, including exclusion of the recent financial crisis period and comparison with non-euro European countries.

Suggested Citation

  • Taamouti, Abderrahim & Luque, Jaime, 2013. "Did the Euro Change the Effect of Fundamentals on Growth and Uncertainty?," UC3M Working papers. Economics we1221, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we1221
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    File URL: https://e-archivo.uc3m.es/bitstream/handle/10016/14893/we1221.pdf?sequence=5
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    References listed on IDEAS

    as
    1. Eichengreen, Barry, 1990. "Is Europe an Optimum Currency Area?," CEPR Discussion Papers 478, C.E.P.R. Discussion Papers.
    2. Alexandru Minea & Antoine Parent, 2012. "Is High Public Debt Always Harmful to Economic Growth? Reinhart and Rogoff and some complex nonlinearities," Working Papers 12-08, Association Française de Cliométrie (AFC).
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    Cited by:

    1. Luque, Jaime & Morelli, Massimo & Tavares, José, 2014. "A volatility-based theory of fiscal union desirability," Journal of Public Economics, Elsevier, vol. 112(C), pages 1-11.

    More about this item

    Keywords

    Euro zone;

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F15 - International Economics - - Trade - - - Economic Integration
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F00 - International Economics - - General - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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