Analyzing the Threshold Relationship between Public Debt and Economic Growth in New EU Member States from Central and South Eastern Europe

This paper examines the relationship between public debt and economic growth in 11 new EU member states (NMS) from Central and South Eastern Europe during 2000–2021. The authors explore the potential non-linear (quadratic) nature of this relationship, accounting for heterogeneity by dividing the NMS...

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Bibliographic Details
Published in:Ekonomický časopis Vol. 72; no. 7-08; pp. 360 - 389
Main Authors: Petkovski, Mihail, Stojkov, Aleksandar, Kjosevski, Jordan
Format: Journal Article
Language:English
Published: Bratislava SAV - Slovenská akadémia vied - Ekonomický ústav SAV a Prognostický ústav SAV 01.01.2024
SAS - Slovak Academy of Sciences - Institute of Economic Research of the SAS and Institute for Forecasting SAS (co-publisher)
Slovak Academy of Sciences, Institute of Economic Research
Subjects:
Business Economy / Management
Data models
Debt management
Debt service
Deficit financing
Econometrics
Economic analysis
Economic growth
Economic history
Fiscal policy
GDP
Generalized method of moments
Gross Domestic Product
International finance
Macroeconomics
National Economy
Public Finances
Socio-Economic Research
Supranational / Global Economy
Czech Republic
Latvia
Romania
Hungary
Eastern Europe
Poland
Slovakia
Slovenia
Lithuania
Bulgaria
Estonia
Croatia
EU
debt threshold
public debt
economic growth
ISSN:0013-3035, 2729-7470
Online Access:Get full text
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Summary:This paper examines the relationship between public debt and economic growth in 11 new EU member states (NMS) from Central and South Eastern Europe during 2000–2021. The authors explore the potential non-linear (quadratic) nature of this relationship, accounting for heterogeneity by dividing the NMS into three subgroups: South Eastern European, Baltic, and Visegrad countries. Findings suggest a U-inverted relationship, where public debt positively affects growth up to a threshold, beyond which a negative effect prevails. The estimated debt-to-GDP tipping point ranges from 58.5% to 73.5%, depending on the subgroup. The results offer insights for designing a new EU fiscal rules framework.
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ISSN:0013-3035
2729-7470
DOI:10.31577/ekoncas.2024.07-08.03