GDP volatility before and after the euro : the evidence

Abstract

The message in this note is that the adoption of the Euro has changed the effect of Eurozone countries’ economic fundamentals on per capital Gross Domestic Product (GDPpc) growth rate volatility (economic uncertainty). Increments in government debt significantly decreased GDPpc growth rate volatility before the Euro, but increased it after. The other fundamentals exhibit less structural change on economic uncertainty. These stylized facts are robust to different measures of GDPpc growth rate volatility and to the exclusion of the recent financial crisis period, and are specific to the Eurozone countries in Europe.