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Debt-growth link after an economic crisis: The case of Central and Southeast Europe

Author

Listed:
  • Kiril Simeonovski
  • Filip Fidanoski
  • Mihail Petkovski
  • Bruno S. Sergi

Abstract

This paper examines government debt’s effect on economic growth on a sample of 16 countries from Central and Southeast Europe for the period 2009–2018 period. We develop a non-linear dynamic panel-regression model. The findings point out to concavity of the growth function with respect to government debt. The estimates from the baseline model determine the debt threshold at the level of 77.3% of GDP, while the debt threshold ranges from 69.4 to 74.1% of GDP when the primary and overall budget balances are included as covariates. The GMM estimates that we make to deal with potential endogeneity determine the debt threshold at the level of 78.9% of GDP when there are no covariates, while the debt threshold ranges from 75.8 to 80.7% of GDP when the gross fixed capital formation and employment are added as covariates.

Suggested Citation

  • Kiril Simeonovski & Filip Fidanoski & Mihail Petkovski & Bruno S. Sergi, 2022. "Debt-growth link after an economic crisis: The case of Central and Southeast Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 34(3), pages 409-422, April.
    • Handle: RePEc:taf:pocoec:v:34:y:2022:i:3:p:409-422
    DOI: 10.1080/14631377.2021.2006492
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