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The Study of Public Debt. Which Are the Distinctions between the Emerging and Advanced Economies in the European Union?

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  • Stoian, Andreea
  • Iorgulescu, Filip

Abstract

The aim of our paper is to provide a comprehensive study of public debt in various aspects across the European Union,emphasizing the existing distinctions between the emerging and advanced economies in Europe. Using annual data ranging from 1995 to 2013 we develop investigation manifold. Firstly, we study the descriptive statistics of key variables affecting public debt dynamics. We found that the ex-communistcountries recorded lower public debt ratios, negative flow costs and primary deficits. By comparison, the advanced economies managed to run primary surpluses in order to balance larger public debt-to-GDP ratios and the positive flow cost. Secondly, using the accounting approach we analyzed the dynamics of public debt. The results indicated unstable dynamics for the cases of CzechRepublic, Latvia, Lithuania, Poland, Slovakia, Slovenia, Cyprus, France, Germany, Greece, Ireland, Italy, Malta, Portugal, Spain and the United Kingdom. Then, employing a logit model with fixed effects, we also showed that running primary deficits is more likely to increase the probability of having unstable dynamics of public debt. Thirdly, we examined the distribution of the flow cost and revealed that there is an increased probability of extreme values which, in the case of large debt ratios, might lead to high debt burdens for the European countries. We also found that the uncertainty of the future debt burden is driven by the variability of the real GDP growth rate.

Suggested Citation

  • Stoian, Andreea & Iorgulescu, Filip, 2015. "The Study of Public Debt. Which Are the Distinctions between the Emerging and Advanced Economies in the European Union?," MPRA Paper 63539, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63539
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    References listed on IDEAS

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    More about this item

    Keywords

    public debt; flow cost; primary balance; sustainability; European Union;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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