Transformations  in
Business & Economics

CAPITAL FORMATION, CONSUMPTION AND TRADE EFFECTS ON ECONOMIC GROWTH - AN ARDL BASED INVESTIGATION FOR THE EUROZONE COUNTRIES
Bogdan Narcis Firtescu, Nicu Marcu, Florin Oprea, Bogdan-Florin Filip, Vasile-Cosmin Nicula

ABSTRACT. The Euro Zone evolution and stability naturally depends on the economic performance of the Member States, to be achieved under the convergence criteria of the Maastricht Treaty. While some steps have been taken in the past decades by each country, turbulent times, especially the recent economic and pandemic crisis have showed that harmonized public policies should prevail in front of individual (national) ones. From this point of view, our paper aims to emphasize some of the main challenges in ensuring a sustainable economic growth for the Member States during the last two decades, with a special focus on capital formation, consumption and trade. Using data from Eurostat and World Bank for the 1995-2018 period, we have employed ARDL (auto-regressive distributed lag) models to identify major instruments/ levers for achieving the desired macroeconomic equilibrium state. Based on our findings, we propose some public policy recommendations useful both for theoreticians and practitioners.

KEYWORDS:  capital formation, consumption, trade, economic growth, Eurozone.

JEL classification:  E21, E22, O47.