Assessment of public debt sustainability in the Balkan market

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Abstract

This research paper focuses on the relationship between public debt and the economy in the Republic of North Macedonia. Debt size has become a crucial indicator for monitoring the health of economies, and North Macedonia’s economy is often reliant on borrowing. The COVID-19 crisis exacerbated the country’s already high level of debt, limiting budget response options. The effectiveness of implemented measures to mitigate the crisis depends on their adaptation to specific conditions. To assess the sustainability of public debt, the study uses ordinary least squares (OLS) and multivariate regression analysis, providing an empirical evaluation of North Macedonia’s public debt sustainability by using data from the Ministry of Finance. The main findings of the paper reveal insights into the sustainability of public debt and the impact of fiscal policies on economic stability. The study highlights the importance of careful debt management and the need for fiscal policies that strike a balance between supporting economic growth and maintaining budget sustainability. The empirical analysis and methodology employed in the study offer valuable insights for policymakers and researchers, aiding in the formulation of effective fiscal policies. Research has its limitations on the usage of the quartile data for earlier periods — transition periods that were not available.

Keywords: Public Debt, Sustainability, Budget Deficit

Authors’ individual contribution: Conceptualization — M.M. and L.A.M.; Methodology — M.M. and L.A.M.; Investigation — M.M.; Resources — L.A.M.; Writing — Original Draft — M.M. and L.A.M.; Writing — Review & Editing — M.M. and L.A.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G0, G18, H0

Received: 20.01.2023
Accepted: 27.11.2023
Published online: 30.11.2023

How to cite this paper: Mustafi, M., & Mulaj, L. A. (2023). Assessment of public debt sustainability in the Balkan market [Special issue]. Journal of Governance & Regulation, 12(4), 287–296. https://doi.org/10.22495/jgrv12i4siart8