Compliance with the Euro Area Financial Criteria and Economic Convergence in the European Union over the Period 2000–2023

Abstract

The two groups of EU economies, the euro area and the non-euro area, are statistically analyzed taking into account the fulfillment of the euro area financial criteria and economic performance over the period 2000–2023. Compliance with financial criteria, economic performance, and their significant influencing factors are presented comparatively for the two groups of countries. The long-run equilibrium between economic growth and its factors is identified by econometric approaches with the error correction model (ECM) and autoregressive distributed lag (ARDL) models for the two data panels. In the short term, economic shocks are taken into account to compare their different influences on economic growth within the two groups of countries. The GMM system is used to model economic convergence at the EU level over the period under review. Comparisons between GDP growth and its theoretical values from econometric models have led to interesting conclusions regarding the existence and characteristics of economic convergence at the group and EU level. EU countries outside the euro area have higher economic growth rates than euro area economies over the period 2000–2023. In the long run, investment brings a higher increase in economic development in EU countries outside the euro area than in euro area countries. Economic shocks have been felt more deeply on economic growth in the euro area than in the non-euro area. The speed of adjustment towards long-run equilibrium in econometric models is slower for non-euro area economies than in the euro area over a one-year period. At the level of the European Monetary Union, change policies have a faster impact on economic development and a faster speed of adjustment towards equilibrium.