Does public debt affect economic growth? panel evidence from Central and Eastern Europe
Does public debt affect economic growth? panel evidence from Central and Eastern Europe

Summary/Abstract: The paper employs a form of the panel ARDL-based error correction model (ECM)to explore the short-run and long-run relationship between public debt (and certainmacroeconomic variables) and economic growth in Central and Eastern European (CEE)countries. It covers the period 2006Q1−2018Q4. The results indicate both short-term andlong-term causality (except for financial development), though the marginal effects arevariable-specific. There is a negative effect of public debt, interest rate and exchange rateon growth, whereas the saving rate, trade openness, financial development, fixed capitalformation and population growth contribute to economic development. Thus, a responsibleand saving-oriented fiscal policy, coupled with higher private sector investment, an exportorientedprivate sector and undervalued real exchange rate, and population growth wouldcontribute to economic development in CEE countries.

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