NONOLINEAR EFFECT OF THE PUBLIC DEBT ON THE GROWTH OF GDP: THE CASE OF CROATIA

Tihana Škrinjarić and Zrinka Orlovic
Additional contact information
Zrinka Orlovic: University of Zagreb

Economic Thought and Practice, 2017, vol. 26, issue 2, 517-538

Abstract: This research focuses on effects of public debt on economic growth in Croatia. Based upon previous existing literature, this study emphasizes the non linear relationship between public debt and economic growth. Such study has not yet been carried out for Croatia. The empirical research uses quarterly data from January 2000 to April 2016 in order to estimate different specifications of the aforementioned nonlinear relationship. One of the goals is to determine the turning point of the public debt effect. In that way, we want to test the hypothesis that the effects of public debt vary with relation to the share of public debt in GDP. Moreover, the consequences of such relation mean that policy makers need to adjust the structure, size and purpose of public indebtedness in order to obtain long-term sustainable growth. The results show that the intensity of the effect of public debt on economic growth differs with respect to the size of the share of public debt in GDP. Furthermore, the robustness of the results has been checked by adding specific economic variables in the models. Also, results predict that Croatia is in a state where the effect of public debt on economic growth is negative. In that way, it is recommended for economic policy makers to take actions regarding fiscal consolidation and lowering (foreign) indebtedness.

Keywords: public debt; economic growth; nonlinear model; sustainability of growth; Croatia (search for similar items in EconPapers)
JEL-codes: H63 O40 O47 O52 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hrcak.srce.hr/clanak/282070 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:avo:emipdu:v:26:y:2017:i:2:p:517-538

Ordering information: This journal article can be ordered from
Economic Thought and Practice, University of Dubrovnik, Branitelja Dubrovnika 29, 20000 Dubrovnik
https://emip.unidu.hr/

Access Statistics for this article

Economic Thought and Practice is currently edited by Nebojsa Stojcic

More articles in Economic Thought and Practice from Department of Economics and Business, University of Dubrovnik Contact information at EDIRC.
Bibliographic data for series maintained by Nebojsa Stojcic ().