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Determinants of substantial public debt reductions in Central and Eastern European Countries

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  • Sofia Semik

    (Goethe University)

  • Lilli Zimmermann

    (University of Applied Sciences)

Abstract

Government debt development is a timeless issue in economics that has gained even more attention in light of the global financial crisis and the Covid 19 pandemic crisis. The following paper uses several specifications of a logistic probability model to examine the key determinants underlying substantial public debt reductions in Central and Eastern European EU Member States for the period 1996–2020. The results suggest that fiscal adjustments are more likely to be successful in reducing public debt if they are based on expenditure cuts rather than revenue increases. In this context, cuts in social benefits and government employee compensation prove to be particularly effective. In addition, favourable economic growth rates increase the probability of a substantial reduction in government debt.

Suggested Citation

  • Sofia Semik & Lilli Zimmermann, 2022. "Determinants of substantial public debt reductions in Central and Eastern European Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(1), pages 53-70, February.
    • Handle: RePEc:kap:empiri:v:49:y:2022:i:1:d:10.1007_s10663-021-09529-2
    DOI: 10.1007/s10663-021-09529-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Public debt; Fiscal policy; Central and Eastern Europe; Logistic probability model;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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