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Fiscal convergence and sustainability in the European Union
Vladimir Arčabić* 
Vladimir Arčabić
Affiliation: University of Zagreb, Faculty of Economics and Business, Department of Macroeconomics and Economic Development, Zagreb, Croatia
 0000-0003-4173-8637
Correspondence
varcabic@efzg.hr
Article | Year: 2018 | Pages: 353 - 380 | Volume: 42 | Issue: 4 Received: June 1, 2018 | Accepted: October 10, 2018 | Published online: December 14, 2018
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
PDF
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(a)
Government Debt convergence results
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log(t)
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All
Countries
|
|
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γ
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-0.253*
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|
|
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t-stat
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-22.13
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|
|
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Club classification
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log(t)
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Club1
[19]
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Club2
[9]
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γ
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-0.00900
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0.560
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|
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t-stat
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-0.686
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6.100
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(b)
Government Revenues convergence results
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log(t)
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All
Countries
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γ
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-0.729*
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t-stat
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-33.34
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Club classification
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log(t)
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Club1
[19]
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Club2
[5]
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Club3
[2]
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Group4
[2]
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γ
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0.00700
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0.792
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0.114
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-3.378*
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t-stat
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0.527
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22.75
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0.395
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-2.779
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(c)
Government Expenditures convergence results
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log(t)
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All
Countries
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γ
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-1.075*
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t-stat
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-10.68
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Club classification
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log(t)
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Club1
[5]
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Club2
[11]
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Club3
[6]
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Club4
[3]
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Club5
[2]
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γ
|
0.284
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0.264
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0.113
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0.851
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-0.125
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t-stat
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1.016
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16.05
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8.963
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9.936
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-0.154
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Final classification
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log(t)
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Club1
[5]
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Club2
[11]
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Club3
[9]
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Club4
[2]
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γ
|
0.284
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0.264
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0.169
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-0.125
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t-stat
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1.016
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16.05
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14.93
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-0.154
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Note: The table presents γ coefficient from log t regression together with t-statistics. * Marks a rejection of convergence at 5% level. Numbers in brackets are number of countries in the club. Club classification is a result of the initial clustering algorithm. Final classification is a result after club merging. Final classification is presented only when club merging is significant. Countries that form different clubs are presented in figure 3.
Note: Convergence clubs are in squares, non-convergent groups are in circles.
2a: Percent of countries
converging to the average gov. debt (%)
|
|
ADF
|
Lee & Strazicich
|
Enders & Lee
|
|
EU
[28]
|
3.57
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3.57
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7.14
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Club
1 [19]
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0.00
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5.26
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5.26
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Club
2 [9]
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22.22
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0.00
|
0.00
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2b: Percent of
countries converging to the average gov. revenues (%)
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ADF
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Lee & Strazicich
|
Enders & Lee
|
|
EU
[28]
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35.71
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85.71
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46.43
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Club
1 [19]
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42.11
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94.74
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57.89
|
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Club
2 [5]
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40.00
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100.00
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40.00
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Club
3 [2]
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0.00
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100.00
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100.00
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2c: Percent of
countries converging to the average gov. expenditures (%)
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ADF
|
Lee & Strazicich
|
Enders & Lee
|
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EU
[28]
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39.29
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78.57
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46.43
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Club
1 [5]
|
40.00
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100.00
|
40.00
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Club
2 [11]
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54.55
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90.91
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81.81
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Club
3 [9]
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33.33
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77.78
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55.56
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Club
4 [2]
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100.00
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100.00
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100.00
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Models
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Model 1
Benchmark
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Model 2
Club 1
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Model 3
Club 2
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Model 4
EU-15
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Model 5
EU-13
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Model 6
debt ≥ 90%
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Model 7
debt < 90%
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Variables
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
|
Surplus (lagged) (
)
|
0.502***
|
0.415***
|
0.390***
|
0.547***
|
0.308**
|
0.573**
|
0.526***
|
|
|
(0.08)
|
(0.09)
|
(0.10)
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(0.06)
|
(0.11)
|
(0.21)
|
(0.10)
|
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Debt (
)
|
-0.018
|
-0.009
|
-0.043
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-0.029
|
0.040
|
0.036
|
-0.057*
|
|
|
(0.01)
|
(0.01)
|
(0.12)
|
(0.02)
|
(0.03)
|
(0.08)
|
(0.03)
|
|
Output Gap (
)
|
0.286***
|
0.413***
|
0.435***
|
0.394***
|
0.388**
|
0.297**
|
0.305***
|
|
|
(0.05)
|
(0.07)
|
(0.13)
|
(0.04)
|
(0.15)
|
(0.09)
|
(0.07)
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|
Constant
|
0.776
|
0.122
|
2.030
|
1.879
|
-2.351*
|
-4.298
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2.459*
|
|
|
(0.76)
|
(1.06)
|
(5.63)
|
(1.23)
|
(1.15)
|
(8.69)
|
(1.44)
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|
Observations
|
1,708
|
1,159
|
549
|
915
|
793
|
281
|
1,427
|
|
Number of countries
|
28
|
19
|
9
|
15
|
13
|
9
|
26
|
|
F-test
|
0
|
3.40e-06
|
0.00139
|
0
|
2.43e-05
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0.00352
|
0
|
|
# of instruments
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23
|
14
|
11
|
14
|
11
|
11
|
20
|
|
Hansen test
|
0.222
|
0.100
|
0.371
|
0.175
|
0.102
|
0.506
|
0.166
|
|
Models
|
Model 1
Benchmark
|
Model 2
Club 1
|
Model 3
Club 2
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Model 4
EU-15
|
Model 5
EU-13
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Model 6
debt ≥ 90%
|
Model 7
debt < 90%
|
|
Variables
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
Surplus
|
|
Surplus (lagged) (
)
|
0.512***
|
0.515***
|
0.491***
|
0.637***
|
0.336***
|
0.248**
|
0.611***
|
|
|
(0.06)
|
(0.07)
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(0.12)
|
(0.04)
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(0.07)
|
(0.10)
|
(0.09)
|
|
Debt (
)
|
0.006
|
0.004
|
0.025
|
0.003
|
0.029**
|
0.031**
|
-0.009
|
|
|
(0.01)
|
(0.01)
|
(0.02)
|
(0.00)
|
(0.01)
|
(0.01)
|
(0.01)
|
|
Output Gap (
)
|
0.176***
|
0.172***
|
0.209**
|
0.226***
|
0.197***
|
0.213
|
0.133***
|
|
|
(0.04)
|
(0.04)
|
(0.09)
|
(0.03)
|
(0.05)
|
(0.12)
|
(0.04)
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|
Constant
|
-0.614*
|
-0.713
|
-0.998
|
-0.327
|
-1.831***
|
-3.951**
|
0.168
|
|
|
(0.36)
|
(0.42)
|
(0.71)
|
(0.35)
|
(0.40)
|
(1.48)
|
(0.63)
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|
Observations
|
1,708
|
1,159
|
549
|
915
|
793
|
281
|
1,427
|
|
Number of countries
|
0.304
|
0.298
|
0.335
|
0.457
|
0.173
|
0.123
|
0.384
|
|
F-test
|
28
|
19
|
9
|
15
|
13
|
9
|
26
|
|
# of instruments
|
0.512***
|
0.515***
|
0.491***
|
0.637***
|
0.336***
|
0.248**
|
0.611***
|
|
Hansen test
|
(0.06)
|
(0.07)
|
(0.12)
|
(0.04)
|
(0.07)
|
(0.10)
|
(0.09)
|
Note: Standard errors in parentheses, ***, **, and * mark statistical significance at 1%, 5%, and 10% level. Model 1 is the benchmark model. Models 2 and 3 include countries from endogenous debt convergence clubs 1 and 2, respectively. Models 4 and 5 include EU-15 and EU-13 countries, and models 6 and 7 include subsamples with government debt ≥ 90% and debt < 90% of GDP, respectively.
|
Country
|
Revenues
|
Expenditures
|
Debt
|
Surplus
|
|
Mean
|
St. dev.
|
Mean
|
St. dev.
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Mean
|
St. dev.
|
Mean
|
St. dev.
|
|
Belgium
|
0.498
|
0.014
|
0.519
|
0.029
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102.371
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6.191
|
1.489
|
2.662
|
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Bulgaria
|
0.375
|
0.032
|
0.378
|
0.035
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25.430
|
12.762
|
0.809
|
3.995
|
|
Czech R.
|
0.397
|
0.021
|
0.427
|
0.030
|
34.493
|
6.377
|
-1.570
|
2.538
|
|
Denmark
|
0.542
|
0.012
|
0.537
|
0.025
|
41.284
|
6.727
|
2.350
|
2.937
|
|
Germany
|
0.439
|
0.011
|
0.453
|
0.017
|
69.791
|
6.443
|
0.853
|
1.749
|
|
Estonia
|
0.380
|
0.027
|
0.376
|
0.035
|
6.770
|
2.386
|
0.605
|
2.605
|
|
Ireland
|
0.331
|
0.031
|
0.374
|
0.095
|
63.992
|
35.900
|
-3.019
|
8.925
|
|
Greece
|
0.427
|
0.042
|
0.501
|
0.052
|
135.084
|
31.814
|
-2.996
|
4.643
|
|
Spain
|
0.380
|
0.016
|
0.417
|
0.035
|
64.440
|
24.433
|
-1.729
|
4.398
|
|
France
|
0.506
|
0.016
|
0.544
|
0.023
|
78.400
|
13.788
|
-1.601
|
1.526
|
|
Croatia
|
0.433
|
0.030
|
0.478
|
0.030
|
56.491
|
19.248
|
-1.880
|
2.281
|
|
Italy
|
0.453
|
0.019
|
0.485
|
0.019
|
115.085
|
12.457
|
1.345
|
1.277
|
|
Cyprus
|
0.365
|
0.030
|
0.395
|
0.055
|
73.230
|
21.307
|
-0.192
|
5.510
|
|
Latvia
|
0.352
|
0.022
|
0.374
|
0.036
|
26.770
|
14.433
|
-1.088
|
3.003
|
|
Lithuania
|
0.341
|
0.013
|
0.367
|
0.039
|
28.502
|
10.293
|
-1.275
|
3.675
|
|
Luxembourg
|
0.434
|
0.013
|
0.418
|
0.026
|
14.941
|
7.215
|
1.360
|
1.821
|
|
Hungary
|
0.444
|
0.021
|
0.490
|
0.023
|
69.585
|
8.796
|
-0.745
|
3.255
|
|
Malta
|
0.384
|
0.020
|
0.416
|
0.023
|
66.048
|
4.001
|
0.266
|
2.870
|
|
Netherlands
|
0.429
|
0.009
|
0.446
|
0.021
|
56.298
|
8.245
|
-0.165
|
2.086
|
|
Austria
|
0.489
|
0.012
|
0.513
|
0.019
|
76.310
|
6.738
|
0.363
|
1.796
|
|
Poland
|
0.395
|
0.013
|
0.435
|
0.018
|
48.860
|
5.134
|
-1.724
|
1.608
|
|
Portugal
|
0.415
|
0.021
|
0.469
|
0.035
|
92.343
|
30.325
|
-1.906
|
3.499
|
|
Romania
|
0.335
|
0.016
|
0.367
|
0.033
|
25.756
|
10.096
|
-1.550
|
3.267
|
|
Slovenia
|
0.434
|
0.010
|
0.472
|
0.048
|
44.276
|
22.349
|
-1.759
|
4.888
|
|
Slovakia
|
0.373
|
0.024
|
0.417
|
0.039
|
43.263
|
8.989
|
-1.969
|
2.157
|
|
Finland
|
0.531
|
0.013
|
0.520
|
0.040
|
46.337
|
10.241
|
1.891
|
3.288
|
|
Sweden
|
0.520
|
0.019
|
0.515
|
0.016
|
42.539
|
4.814
|
1.568
|
1.730
|
|
UK
|
0.378
|
0.012
|
0.420
|
0.036
|
60.967
|
22.826
|
-2.558
|
2.478
|
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December, 2018
IV/2018 |
