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Public Debt and Economic Growth in the European Union: Lessons for Post-pandemic Period

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  • Mihaela Simionescu

Abstract

Europe's public debt situation is likely to persist in the coming years. This study evaluates the impact of public debt on growth in the EU-27 countries. The analysis, using dynamic panel threshold models, reveals an indirect connection between debt and growth from 1995 to 2023. The research identifies an indirect effect of general and central debt on economic growth during the COVID-19 pandemic. While government effectiveness positively influences growth in the long run, this effect is not observed during the pandemic. To ensure the robustness of our findings, dynamic panel data models and mean group (MG) estimators are employed. The empirical results support the need for policies to reduce public debt and promote sustainable growth in the EU.

Suggested Citation

  • Mihaela Simionescu, 2025. "Public Debt and Economic Growth in the European Union: Lessons for Post-pandemic Period," Politická ekonomie, Prague University of Economics and Business, vol. 2025(6), pages 967-985.
    • Handle: RePEc:prg:jnlpol:v:2025:y:2025:i:6:id:1467:p:967-985
    DOI: 10.18267/j.polek.1467
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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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