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Determinants of substantial public debt reductions in Central and Eastern European Countries

Sofia Semik () and Lilli Zimmermann ()
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Sofia Semik: Goethe University
Lilli Zimmermann: University of Applied Sciences

Empirica, 2022, vol. 49, issue 1, No 3, 53-70

Abstract: Abstract Government debt development is a timeless issue in economics that has gained even more attention in light of the global financial crisis and the Covid 19 pandemic crisis. The following paper uses several specifications of a logistic probability model to examine the key determinants underlying substantial public debt reductions in Central and Eastern European EU Member States for the period 1996–2020. The results suggest that fiscal adjustments are more likely to be successful in reducing public debt if they are based on expenditure cuts rather than revenue increases. In this context, cuts in social benefits and government employee compensation prove to be particularly effective. In addition, favourable economic growth rates increase the probability of a substantial reduction in government debt.

Keywords: Public debt; Fiscal policy; Central and Eastern Europe; Logistic probability model (search for similar items in EconPapers)
JEL-codes: C35 E62 H6 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10663-021-09529-2

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