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Public Debt and Economic Growth in the EU Post-Communist Countries

Author

Listed:
  • Gheorghiţă DINCĂ

    (Department of Finance and Accounting, Transilvania University of Brasov, Romania.)

  • Marius Sorin DINCĂ

    (Department of Finance and Accounting, Transilvania University of Brasov, Romania. *)

Abstract

Our paper empirically explores the relationship between the ratio of government debt to Gross Domestic Product (GDP) and the per capita GDP growth rate for a sample of 10 former Communist countries, currently members of the EU 27, for the 1999-2010 period. The results show a statistically significant non-linear relationship between the government debt to GDP ratio and the per capita GDP growth rate for all the analyzed countries. We have found that the government debt turning point is around 50%. If the government debt to GDP ratio exceeds this level, it could generate a negative impact on the GDP growth rate. The 95% confidence intervals for the debt turning point start as low as 40% of GDP, which calls for more prudent government debt policies.

Suggested Citation

  • Gheorghiţă DINCĂ & Marius Sorin DINCĂ, 2015. "Public Debt and Economic Growth in the EU Post-Communist Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 119-132, June.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:2:p:119-132
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    References listed on IDEAS

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    Cited by:

    1. Milena Konatar & Jovan Đurašković & Julija Cerović Smolović & Milivoje Radović, 2022. "Does Public Debt Affect Economic Growth? Panel Evidence from Central and Eastern Europe," Politická ekonomie, Prague University of Economics and Business, vol. 2022(5), pages 574-596.
    2. Tomislav GLOBAN & Marina MATOŠEC, 2016. "Public Debt-to-GDP Ratio in New EU Member States: Cut the Numerator or Increase the Denominator?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 57-72, September.
    3. Burim Gashi, 2020. "The Impact of Public Debt on the Economic Growth in South Eastern Europe: An Empirical Panel Investigation," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 3-18.
    4. Shvets, Serhii, 2017. "Internal public debt and economic growth: a case study of Ukraine," MPRA Paper 103873, University Library of Munich, Germany, revised 2017.

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    More about this item

    Keywords

    public debt; economic growth; fiscal policy; returning point; sustainability of public finance;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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