Machine Learning Algorithm for Mid-Term Projection of the EU Member States’ Indebtedness

Silvia Zarkova, Dimitar Kostov, Petko Angelov, Tsvetan Pavlov and Andrey Zahariev ()
Additional contact information
Silvia Zarkova: Department of Finance and Credit, Tsenov Academy of Economics, 5250 Svishtov, Bulgaria
Dimitar Kostov: Department of Finance and Credit, Tsenov Academy of Economics, 5250 Svishtov, Bulgaria
Petko Angelov: Department of Finance and Credit, Tsenov Academy of Economics, 5250 Svishtov, Bulgaria
Tsvetan Pavlov: Department of Finance and Credit, Tsenov Academy of Economics, 5250 Svishtov, Bulgaria
Andrey Zahariev: Department of Finance and Credit, Tsenov Academy of Economics, 5250 Svishtov, Bulgaria

Risks, 2023, vol. 11, issue 4, 1-17

Abstract: The main research question addressed in the paper is related to the possibility of medium-term forecasting of the public debts of the EU member states. The analysis focuses on a broad range of indicators (macroeconomic, fiscal, monetary, global, and convergence) that influence the public debt levels of the EU member states. A machine learning prediction model using random forest regression was approbated with the empirical data. The algorithm was applied in two iterations—a primary iteration with 33 indicators and a secondary iteration with the 8 most significant indicators in terms of their influence and forecasting importance regarding the development of public debt across the EU. The research identifies a change in the medium term (2023–2024) in the group of the four most indebted EU member states, viz., that Spain will be replaced by France, which is an even more systemic economy, and will thus increase the group’s share of the EU’s GDP. The results indicate a logical scenario of rising interest rates with adverse effects for the fiscal imbalances, which will require serious reforms in the public sector of the most indebted EU member states.

Keywords: debt-to-GDP ratio; machine learning; random forest regression; mid-term projection; EU member states’ indebtedness (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-9091/11/4/71/pdf (application/pdf)
https://www.mdpi.com/2227-9091/11/4/71/ (text/html)

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:gam:jrisks:v:11:y:2023:i:4:p:71-:d:1114386

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().