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Public Debt-to-GDP Ratio in New EU Member States: Cut the Numerator or Increase the Denominator?

Author

Listed:
  • Tomislav GLOBAN

    (Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia.)

  • Marina MATOŠEC

    (Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia.)

Abstract
This paper analyses public debt determinants in EU new member states. The aim is to examine the fiscal position of these countries, as well as to offer proposals for a more successful containment of the rising debt levels. The paper attempts to answer the key question: does fiscal consolidation (the numerator) or economic growth (the denominator) have a stronger impact in determining the debt-to-GDP ratio? Results of the panel data analysis showed that by achieving a more balanced government budget, public debt growth decreases, but the effect is rather small. Conversely, estimated GDP growth parameters are much greater. Results imply that the sovereign debt crisis should be resolved by stimulating economic growth, while bearing in mind the high price of potentially irresponsible public finance management.

Suggested Citation

  • Tomislav GLOBAN & Marina MATOŠEC, 2016. "Public Debt-to-GDP Ratio in New EU Member States: Cut the Numerator or Increase the Denominator?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 57-72, September.
    • Handle: RePEc:rjr:romjef:v::y:2016:i:3:p:57-72
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    7. Pratibha, S. & Sharma, Vishal & Krishna, M., 2024. "Nexus between total natural resource rents and public debt within symmetric and asymmetric framework: Fresh insight from resource-rich economy," Resources Policy, Elsevier, vol. 93(C).
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    More about this item

    Keywords

    debt crisis; economic growth; fiscal consolidation; new EU member states; sovereign debt;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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