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

16 Pages Posted: 21 Oct 2016

See all articles by Bettina Bökemeier

Bettina Bökemeier

Bielefeld University - Department of Business Administration and Economics

Christiane Clemens

University of Bielefeld

Date Written: October 2016

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

JEL Classification: O4, H63, E62

Suggested Citation

Bökemeier, Bettina and Clemens, Christiane, Does it Pay to Fulfill the Maastricht Convergence Criteria? ― Reflections on the Public Debt and Growth Nexus for Selected European Economies (October 2016). Bielefeld Working Papers in Economics and Management No. 10-2016, Available at SSRN: https://ssrn.com/abstract=2856167

Bettina Bökemeier

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

Christiane Clemens (Contact Author)

University of Bielefeld ( email )

Universitätsstraße 25
Bielefeld, NRW 33613
Germany

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