The threshold effect of public debt on economic growth: The case of the new European Union member states

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Abstract

The aim of this paper is to analyze the impact of public debt on economic growth and the possible existence of a non-linear relationship in eleven European Union (EU) new member states (NMS) for the period 2000–2019. If we compare this study with the studies of Reinhart and Rogoff (2010) and Kumar and Woo (2010), in this study, we will use more recent data that will enable us to perceive the relationship between public debt and economic growth in the new EU countries. The results of our study show that the debt turning point is roughly between 40.16 and 61.2 percent of GDP, dependent on which subgroup we have analyzed. This paper contributes to determining the point of public debt that would contribute to the economic growth of the new EU member states.

Keywords: Public Debt, Economic Growth, EU New Member States, System GMM

Authors’ individual contribution: Conceptualization — G.R. and V.Z.; Methodology — G.R. and V.Z.; Formal Analysis — G.R. and V.Z.; Investigation — G.R. and V.Z.; Resources — G.R. and V.Z.; Writing — G.R. and V.Z.; Supervision — G.R. and V.Z.

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

JEL Classification: E62, H63, O47

Received: 30.12.2022
Accepted: 05.06.2023
Published online: 08.06.2023

How to cite this paper: Rexhepi, G., & Zeqiraj, V. (2023). The threshold effect of public debt on economic growth: The case of the new European Union member states. Journal of Governance & Regulation, 12(2), 194–199. https://doi.org/10.22495/jgrv12i2art18