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.