Public Debt and Economic Growth in the European Union: Lessons for Post-pandemic Period

Mihaela Simionescu

Politická ekonomie, 2025, vol. 2025, issue 6, 967-985

Abstract: Europe's public debt situation is likely to persist in the coming years. This study evaluates the impact of public debt on growth in the EU-27 countries. The analysis, using dynamic panel threshold models, reveals an indirect connection between debt and growth from 1995 to 2023. The research identifies an indirect effect of general and central debt on economic growth during the COVID-19 pandemic. While government effectiveness positively influences growth in the long run, this effect is not observed during the pandemic. To ensure the robustness of our findings, dynamic panel data models and mean group (MG) estimators are employed. The empirical results support the need for policies to reduce public debt and promote sustainable growth in the EU.

Keywords: Debt; government effectiveness; economic growth; panel data models; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: C33 E01 H63 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.18267/j.polek.1467

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