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Abstract

This paper aims to analyze the impact of public debt on economic growth in eleven EU new member states (NMS) from Central and South-Eastern Europe for the period 2000-2019. More specifically, we investigate if there is evidence of a non-linear (quadratic) relationship in this group of countries. Having in mind different economic and financial development, historical connections, and geographical proximity, we split them into three more homogenous groups: Balkan countries (BAL-4), Baltic countries (B-3), and Visegrad countries (VIS-4). The results of our study in all models indicate a statistically significant non-linear impact of public debt ratios on annual GDP per capita growth rates. The results across all models show a significant non-linear impact of public debt ratios on annual GDP per capita growth rates. Further, the calculated debt-to-GDP turning point, where the positive effect of accumulated public debt inverts into a negative effect, is roughly between 42.7%-58% of GDP, dependent on which sub-group we have analyzed. In general, the research may contribute to a better understanding of the problem of high public debt and its effect on economic activity in the new EU.
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Authors and Affiliations

Burim Gashim
1
Gazmore Rexhepi
2

  1. University “Haxhi Zeka”, Republika e Kosovës
  2. University Fehmi Agani gjakove Rr. “Ismail Qemali”, Republika e Kosovës

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