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The Impact of Public Debt on the Economic Growth in South Eastern Europe: An Empirical Panel Investigation

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  • Burim Gashi

Abstract

The goal of this paper is to examine the impact of public debt in six countries from South-Eastern Europe over the period 2008 to 2017, by applying three different panel methods: the fixed effects model, the GMM method and the system-GMM method. More specifically, we investigate if there is evidence of a non-linear (quadratic) relationship in this group of countries. The results of our study confirm that increasing public debt has a statistically significant negative influence on the GDP growth. Also, the results confirm the existence of a „U inverted” relationship, with a maximum debt threshold of about 58% of GDP. After this threshold, public debt is expected to negatively affect the economic growth rate, due to fear of public debt unsustainability higher interest rates, and severe budgetary consolidation measures.

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  • 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.
    • Handle: RePEc:bas:econst:y:2020:i:2:p:3-18
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    More about this item

    JEL classification:

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

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