The Impact of Public Debt on Private Consumption in Developing European Countries

This study will investigate the relationship between public debt and private consumption. In the last decade, public debt and its impact on the economy has become a very current and vital topic for many scholars in developed and developing countries.Therefore, the primary purpose of this study is to show the effect of public debt on the growth of private consumption in developing countries, where about 20 countries will be analyzed. The source of data for the realization of this study will be based on international financial institutions such as World Bank, International Monetary Fund, and European Bank for Reconstruction and Development, while the analysis period includes data from 1995 to 2020. Drafting and the research will be organized by applying a diverse methodology, which includes advanced econometric methods and techniques such as OLS, Fixed Effects, Random Effects, and GMM. The main findings of this study show a non-linear relationship between public debt and private consumption in developing European countries. More specifically, the increase in public debt negatively affects private consumption expenditures. The results provided through this study present data on developing European countries’ policies about the ratio of public debt to private consumption.