Time-varying Effects of Public Debt on the Financial and Banking Development in the Central and Eastern Europe

Karel Janda and Oleg Kravtsov

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we investigate the time varying effects of domestic public debts on the financial development, private credit and banking performance in the countries of the Central Eastern Europe, Balkan and Baltics region. By analyzing the empirical relationships among indicators and ratios of financial development and banking performance, we test their time-varying responses to changes in public debt through the described transmission channels. The econometric results suggest that the most significant determinant of private debt is the growing public debt over the short-midterm horizon. This might imply the crowding-out effect of public debt on private credit in the region. The growth of public debt positively impacts the banking sector efficiency only over the short-term period, while we observe only minor time effects in responses to changes in public debt on the financial stability indicators.

Keywords: sovereign debt; private credit; financial development; Central Eastern Europe (search for similar items in EconPapers)
JEL-codes: G21 P24 R11 (search for similar items in EconPapers)
Date: 2017-03-06
New Economics Papers: this item is included in nep-tra
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Citations: View citations in EconPapers (2)

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