SOGEI website background

Examination of Indicators Determining the Rate of Government Debt

As a consequence of the crisis of 2008, public debts started to grow throughout the world, causing further economic problems for countries. Several EU Member States have been forced to use the assistance of the troika to alleviate their financing difficulties. The purpose of this paper is to examine the factors influencing public debt. We compared the factors affecting the public debt of GIPS countries, supplemented with data series of the Visegrád Group and Cyprus, using the one-step dynamic panel model. The correlations previously uncovered in literature could be identified in both panels. Deficit, inflation and the deterioration of the current account balance lead to the increase, whereas the growth of the real interest rate and GDP and the improvement of employment lead to the decrease of public debt. Real effective exchange rate, however, proved insignificant in both panels.