Internal public debt and economic growth: a case study of Ukraine

The paper addressed estimating the public debt-to-GDP threshold ratio in the developing economy encountered with an excessive public debt impact on macro-dynamics. The study's active field focused on the internal public debt due to a recent tendency of external share substitution in the developing economies. Among many publications dedicated to the public debt thematic, the study object usually focused on an array of countries using the same method to evaluate the threshold ratio. Analyzing behavior specifics concerning the economy in crises and thereafter, there is a need to carry out the public debt study for the particular economy. The research suggested an algorithm for determining the internal public debt-to-GDP threshold ratio by applying a scenario modeling tool. Considering a growing burden of public debt in Ukraine, we elaborate an econometric macro model operated through fiscal-monetary interaction. The model was used to evaluate the internal public debt-to-GDP threshold ratio in Ukraine. The threshold ratio proved to be 40% of GDP, while a similar result for the total amount of public borrowings was about twice as high. Although the given ratio remained below the estimated threshold as of the second quarter of 2017, a space degree was small and would collapse soon. Considering sluggish economic recovery following the last recession in 2014‑2015, Ukraine would face the challenge of reopening the agenda of a growing debt burden in the near future.