Please use this identifier to cite or link to this item: http://hdl.handle.net/20.500.12188/25750
Title: Public Debt and Economic Growth – The Case of the Republic of North Macedonia
Authors: Kozheski, Kristijan 
Trpeski, Predrag 
Cvetanoska, Marijana 
Merdzan, Gunter 
Keywords: Economic growth
GDP per capita
Granger causality
North Macedonia
public debt
Issue Date: 15-Jun-2021
Publisher: Faculty of Economics in East Sarajevo
Journal: Proceedings of the Faculty of Economics in East Sarajevo – Journal of Economics and Business, No. 21
Abstract: Establishing and maintaining macroeconomic stability and fiscal discipline on the one hand, and stimulating economic activity, by enhancing the quality of public finances, increasing capital expenditures, and enhancing competitiveness in the Macedonian economy, on the other hand, are two opposing objectives that should be pursued by policymakers. Government borrowing, especially foreign borrowing, is an important source of fixed assets to cover public expenditure. However, the sustainability of public debt depends not only on the level of public debt, but also on the structure and successful implementation of policies to boost economic growth. Borrowing for a country with low economic potential and a constant shortage of capital is inevitable, especially external borrowing. However, the structure, purpose of the assets and their multiplier effect on the overall economy are the main criteria for assessing the impact of public debt on the economy. This paper attempts to apply the econometric VAR analysis to examine the correlation and causal relationship between public debt and economic growth rate of the case of the Republic of North Macedonia for the period 2002 - 2017. The variables to be analyzed are: GDP growth per capita, Public debt as a proportion of GDP, Gross Domestic Investment, Interest Rate and Government Spending. For the purpose of this analysis, a Granger causality test has been conducted. The test results indicate that the impact of public debt growth in North Macedonia does not have a significant impact on GDP growth per capita. The other test that is being conducted is a Vector Error Correction Model which shows that public debt is negatively correlated with short run and long run economic growth.
URI: http://hdl.handle.net/20.500.12188/25750
ISSN: 1840-3557
DOI: https://doi.org/10.7251/ZREFIS2021011T
Appears in Collections:Faculty of Economics 03: Journal Articles / Статии во научни списанија

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