The Impact of Public Debt Threshold on Economic Growth Before and After the COVID-19 Pandemic: An Empirical Analysis of Central and Eastern European Developing Countries

Jusaj Yvesa (), Avdimetaj Kestrim (), Zogaj Valmir () and Gara Atdhetar ()
Additional contact information
Jusaj Yvesa: University Haxhi Zeka, Peja, Kosovo
Avdimetaj Kestrim: Faculty of Management Business and Economics, Pristina, Kosovo
Zogaj Valmir: University Haxhi Zeka, Peja, Kosovo
Gara Atdhetar: South East European University, Tetovo, North Macedonia

Economics and Culture, 2025, vol. 22, issue 1, 123-135

Abstract: Research purpose. This research paper delves into the threshold effects of public debt on economic growth in Central and Eastern European countries, both before and after the COVID-19 pandemic. Its primary aim is to pinpoint critical thresholds of the public debt-to-GDP ratio that either stimulate or hinder economic growth in these regions. Design / Methodology / Approach. Data spanning from 2010 to 2022 are analysed using a variety of advanced econometric techniques including OLS, Fixed-Effects models, Random-Effects models, Hausman Taylor Estimation, GMM Dynamic Panel Data, and the Threshold model. Findings. The study reveals significant findings: before the COVID-19 pandemic, the optimal debt-to-GDP ratio threshold stood at 42.5%. However, considering the combined impact of the COVID-19 pandemic and the Ukraine crisis, this threshold adjusts to 33.69%. This indicates that Central and Eastern European countries can safely increase their debt levels up to these points without detriment to economic growth. Beyond these thresholds, however, further increases in public debt yield negative economic effects. These findings offer invaluable insights for policymakers in Central and Eastern European countries, equipping them with evidence-based guidance on managing public debt levels effectively. Originality / Value / Practical implications. This study offers original insights into public debt thresholds' effects on economic growth in Central and Eastern European developing countries before and after the COVID-19 pandemic. It highlights how debt thresholds shifted due to the pandemic and geopolitical events, providing practical guidance for policymakers. These findings support evidence-based debt management strategies to ensure economic stability and growth in the CEE region.

Keywords: economic growth; public debt; threshold; CEE region (search for similar items in EconPapers)
JEL-codes: C24 F34 O40 O5 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/jec-2025-0010 (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:vrs:ecocul:v:22:y:2025:i:1:p:123-135:n:1010

DOI: 10.2478/jec-2025-0010

Access Statistics for this article

Economics and Culture is currently edited by Velga Vēvere

More articles in Economics and Culture from Sciendo
Bibliographic data for series maintained by Peter Golla ().