Publication: Did the Euro Change the Effect of Fundamentals
on Growth and Uncertainty?
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2013-09
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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.
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GDPpc growth rate, GDPpc growth rate volatility, Fundamentals, Government debt, Currency union, Euro zone