IDEAS home Printed from https://ideas.repec.org/a/fst/rfsisf/v16y2024i9p52-67.html
   My bibliography  Save this article

Assessment of Public Debt Drivers in the Balkans

Author

Listed:
  • Kevin Bica

    (Beder University College, Tirana, Albania)

  • Erinda Imeraj

    (Epoka University, Tirana, Albania)

Abstract

This study investigates the main drivers of public debt and assesses the overall debt structure in the Balkan countries. Regardless of a close to 50% average debt level, there is no immediate threat of escalation compared to developed countries. The empirical analysis leverages three advanced econometric techniques to control for cross-country specifics and potential biases due to data disruptions. Sourced from the World Bank and the International Monetary Fund, the data are of quantitative type collected from 2000-2021. Empirical evidence suggests that Real GDP Growth and Current Account balance are crucial determinants of economic performance, with political regimes also exerting a notable influence. As the time frame of the research consists of the COVID-19 pandemic, it is essential to consider structural breakdowns to avoid any coefficient biases. Unsurprisingly, the dummy variable COVID-19 depicts a significant effect as public debt increased by 2.51 percentage points once the pandemic occurred. The rest of the variables, including interest rates, government expenditure, and unemployment rate, are statistically insignificant. Empirical evidence from the present study supports the hypothesis that pursuing genuine economic development through the advocacy of domestic production and trade, coupled with the consolidation of democratic institutions, can act as a check on the spiraling growth of public debt.

Suggested Citation

  • Kevin Bica & Erinda Imeraj, 2024. "Assessment of Public Debt Drivers in the Balkans," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 52-67, May.
    • Handle: RePEc:fst:rfsisf:v:16:y:2024:i:9:p:52-67
    DOI: 10.55654/JFS.2024.9.16.04
    as

    Download full text from publisher

    File URL: https://revista.isfin.ro/wp-content/uploads/2024/05/4.-Kevin-Bica-et..pdf
    Download Restriction: no
    File URL: https://revista.isfin.ro/2024/05/25/assessment-of-public-debt-drivers-in-the-balkans/
    Download Restriction: no
    File URL: https://libkey.io/10.55654/JFS.2024.9.16.04?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 30(82), pages 291-333.
    2. Ratbek Dzhumashev, 2014. "The Two-Way Relationship Between Government Spending And Corruption And Its Effects On Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 403-419, April.
    3. Cooray, Arusha & Dzhumashev, Ratbek & Schneider, Friedrich, 2017. "How Does Corruption Affect Public Debt? An Empirical Analysis," World Development, Elsevier, vol. 90(C), pages 115-127.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    5. Gómez-Puig, Marta & Sosvilla-Rivero, Simón & Martínez-Zarzoso, Inmaculada, 2022. "On the heterogeneous link between public debt and economic growth," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    6. Balkan, Erol M & Greene, Kenneth V, 1990. "On Democracy and Debt," Public Choice, Springer, vol. 67(3), pages 201-211, December.
    7. Sinha, Pankaj & Arora, Varun & Bansal, Vishakha, 2011. "Determinants of Public Debt for middle income and high income group countries using Panel Data regression," MPRA Paper 32079, University Library of Munich, Germany.
    8. Manoel Bittencourt, 2019. "Young democracies and government debt: evidence from South America," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 22(4), pages 351-368, October.
    9. Aizenman, Joshua & Marion, Nancy, 2011. "Using inflation to erode the US public debt," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 524-541.
    10. Luigi Benfratello & Alfredo Del Monte & Luca Pennacchio, 2018. "Corruption and public debt: a cross-country analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 25(5), pages 340-344, March.
    11. 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.
    12. Profeta, Paola & Puglisi, Riccardo & Scabrosetti, Simona, 2013. "Does democracy affect taxation and government spending? Evidence from developing countries," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 684-718.
    13. Michael U. Krause & Stéphane Moyen, 2016. "Public Debt and Changing Inflation Targets," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 142-176, October.
    14. Forslund, Kristine & Lima, Lycia & Panizza, Ugo, 2011. "The determinants of the composition of public debt in developing and emerging market countries," POLIS Working Papers 156, Institute of Public Policy and Public Choice - POLIS.
    15. Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201.
    16. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2010. "The future of public debt: prospects and implications," BIS Working Papers 300, Bank for International Settlements.
    17. Ilhèm Gargouri & Majdi Ksantini, 2016. "The Determinants Of Public Debt," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 111-124, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ampofo, Gideon Minua Kwaku & Jinhua, Cheng & Bosah, Philip Chukwunonso & Ayimadu, Edwin Twum & Senadzo, Patrick, 2021. "Nexus between total natural resource rents and public debt in resource-rich countries:A panel data analysis," Resources Policy, Elsevier, vol. 74(C).
    2. Wang, Wencheng & Ning, Zinan & Shu, Yang & Riti, Joshua Sunday & Riti, Miriam-Kamah J., 2023. "Natural resource rents and public debts nexus in African resource-rich and most indebted nations: Issues with aggregation bias," Resources Policy, Elsevier, vol. 82(C).
    3. Carrera, Jorge & de la Vega, Pablo, 2021. "The impact of income inequality on public debt," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    4. Yifei Cai, 2017. "Nonlinear Analysis of Economic Growth, Public Debt and Policy Tools," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(1), pages 99-108, January.
    5. Samia OMRANE BELGUITH & Hanen OMRANE, 2017. "Macroeconomic determinants of public debt growth: A case study for Tunisia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(613), W), pages 161-168, Winter.
    6. Cai, Yifei, 2016. "经济增长与政府债务的非线性研究及其政策治理 [Nonlinear Analysis of Economic Growth and Public Debt and Policy Governance]," MPRA Paper 72783, University Library of Munich, Germany.
    7. Khansa Zaman & Muhammad Saeed Rana & Umer Iftikhar, 2019. "A Multilevel Analysis of Job Demands and Intention to Resign Through Perceived Service Recovery Performance," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 11(2), pages 67-82, June.
    8. Pratibha, S. & Sharma, Vishal & Krishna, M., 2024. "Nexus between total natural resource rents and public debt within symmetric and asymmetric framework: Fresh insight from resource-rich economy," Resources Policy, Elsevier, vol. 93(C).
    9. Muhammad Jalib Sikandar & Fazale Wahid, 2019. "Debt and Economic Growth of Pakistan; Role of Uncertain Economic and Political Conditions," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 11(2), pages 83-106, June.
    10. Chukwuebuka Bernard Azolibe, 2021. "Determinants of External Indebtedness in Heavily Indebted Poor Countries: What Macroeconomic and Socio-Economic Factors Matter?," The American Economist, Sage Publications, vol. 66(2), pages 249-264, October.
    11. Alfredo Monte & Luca Pennacchio, 2020. "Corruption, Government Expenditure and Public Debt in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 739-771, December.
    12. Hileman, Garrick, 2012. "The seven mechanisms for achieving sovereign debt sustainability," Economic History Working Papers 42878, London School of Economics and Political Science, Department of Economic History.
    13. Jens Hilscher & Alon Raviv & Ricardo Reis, 2022. "Inflating Away the Public Debt? An Empirical Assessment," The Review of Financial Studies, Society for Financial Studies, vol. 35(3), pages 1553-1595.
    14. Joshua Mason and Arjun Jayadev, "undated". "Fisher Dynamics in Household Debt: The Case of the U.S. 1929-2011," Working Papers 13, University of Massachusetts Boston, Economics Department.
    15. Ichiro Fukunaga & Takuji Komatsuzaki & Hideaki Matsuoka, 2022. "Inflation and public debt reversals in advanced economies," Contemporary Economic Policy, Western Economic Association International, vol. 40(1), pages 124-137, January.
    16. Bernardin Akitoby & Ariel Binder & Takuji Komatsuzaki, 2017. "Inflation and Public Debt Reversals in the G7 Countries," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(7), pages 5-27, May.
    17. Patrick Villieu, 2011. "Quel objectif pour la dette publique à moyen terme ?," Revue d'Économie Financière, Programme National Persée, vol. 103(3), pages 79-98.
    18. Sutherland, Douglas, 2012. "Fiscal Consolidation Needs and Implications for Growth," MPRA Paper 38745, University Library of Munich, Germany.
    19. Agnello, Luca & Sousa, Ricardo M., 2015. "Can re-regulation of the financial sector strike back public debt?," Economic Modelling, Elsevier, vol. 51(C), pages 159-171.
    20. Alfredo Monte & Luca Pennacchio, 0. "Corruption, Government Expenditure and Public Debt in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 0, pages 1-33.

    More about this item

    Keywords

    Public debt; Economic Growth; COVID-19; Panel Data; Inflation; Balkans.;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fst:rfsisf:v:16:y:2024:i:9:p:52-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cosmin Catalin Olteanu (email available below). General contact details of provider: https://edirc.repec.org/data/isfinro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.