THE INTRODUCTION OF THE EURO AND ECONOMIC GROWTH: SOME PANEL DATA EVIDENCE

We use a difference in difference estimation framework to analyse the effects of the adoption of the euro on the level of per capita GDP for a sample of seventeen European countries (the EU15 plus Norway and Iceland) over the period 1990-2010. We find that the adoption of the euro may have raised the level of per capita GDP (and labour productivity) by about 4 percent. There is also some evidence that the impact of the euro has been smaller in the case of countries with a high debt-to-GDP ratio in 1999 when the euro was introduced. Results are robust to controlling for country fixed effects, time trends and to estimation strategies that control for cross-country parameter heterogeneity.