Who did it? A European Detective Story Was it Real, Financial, Monetary and/or Institutional: Tracking Growth in the Euro Area with an Atheoretical Tool

Mariarosaria Comunale and Francesco Mongelli

No 481, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: During the past thirty years, euro area countries have undergone significant changes and experienced diverse shocks. We aim to investigate which variables have consistently supported growth in this tumultuous period. The paper unfolds in three parts. First, we assemble a set of 35 real, financial, monetary and institutional variables for all euro area countries covering the period between 1990Q1 and 2016Q4. Second, using the Weighted-Average Least Squares (WALS) method, as well as other techniques, we gather clues about which variables to select. Third, we quantify the impact of various determinants of growth in the short and long runs. Our main finding is the positive and robust role of institutional reforms on long-term growth for all countries in the sample. An improvement in competitiveness matters for growth in the overall euro area in the long run as well as a decline in sovereign and systemic stress. The debt over GDP negatively influences growth for the periphery, but only in the short run. Property and equity prices have a significant impact only in the short run, whereas the loans to NFCs positively affect the core euro area. An increase in global GDP also supports growth.

Keywords: euro area; GDP growth; monetary policy; fiscal policy; institutional integration; financial crisis; systemic stress; and synchronization (search for similar items in EconPapers)
JEL-codes: C23 E40 F33 F43 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-05-11, Revised 2020-05-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-mac and nep-opm
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Related works:
Working Paper: Who did it? A European detective story was it real, financial, monetary and/or institutional: Tracking growth in the Euro area with an atheoretical tool (2020)
Working Paper: Who did it? A European Detective Story. Was it Real, Financial, Monetary and/or Institutional: Tracking Growth in the Euro Area with an Atheoretical Tool (2019)
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