Does it Pay to Fulfill the Maastricht Convergence Criteria? - Reflections on the Public Debt and Growth Nexus for Selected European Economies

Bettina Bökemeier and Christiane Clemens

No 6161, CESifo Working Paper Series from CESifo

Abstract: This paper empirically studies whether it pays off (in terms of economic growth) to fulfill the convergence criteria on the public budget and participation in the Euro-zone. The analysis is based on data of European economies with a special focus on twelve Euro–zone members and a control group of six non–Euro countries for the years from 1970 to 2014. The results show that growth is higher if the debt to GDP ratio is below 60 % compared to values above it. Moreover, a comparison with European economies outside the Euro–zone shows higher growth values for Euro–members than for the control group. Regression estimations reveal a negative relationship between the two variables for the Euro–group. For the control group the relationship is not statistically significant.

Keywords: economic growth; fiscal policy; debt; European Union (search for similar items in EconPapers)
JEL-codes: E62 H63 O40 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6161

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