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Determinants of the Public Debt in the Eurozone and Its Sustainability Amid the Covid-19 Pandemic

Hernán Ricardo Briceño () and Javier Perote ()
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Hernán Ricardo Briceño: Department of Economics and Economic History and Instituto Multidisciplinar de Empresa (IME), Campus Miguel de Unamuno (F.E.S. Building), University of Salamanca, 37007 Salamanca, Spain

Sustainability, 2020, vol. 12, issue 16, 1-29

Abstract: Different economic studies have been concentrated on specific and/or isolated factors to explain public debt evolution. In this article we have developed an integrated viewpoint based on financial, social and governance or institutional factors. Under our dynamic econometric assessment for the last two decades (i.e., since the Euro currency inception), economic growth, interest rate, life expectancy at birth, unemployment, government effectiveness and the last sovereign debt crisis have resulted as being the major determinants of its evolution. Public debt sustainability must be assessed continuously with the aim to discuss technical recommendations to maintain it at an even rate, to allow sustainable economic growth and better life standards, in the context of life expectancy increasing and stable governance and institutional conditions. Undoubtedly, the Covid-19 pandemic leads more damaged Eurozone countries with negative real economic growth and high unemployment rates to increase dramatically their current public debts, to such an extent that they could fall into unsustainable paths. Therefore, substantial reforms in European pension and unemployment insurance systems are necessary conditions to ensure public debt sustainability amid Covid-19 pandemic.

Keywords: sustainability; public debt; Covid-19 pandemic; governance-institution indicators; Eurozone (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2020
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