Impact of macroeconomic indicators on public debt of Slovak Republic
Abstract
The paper focuses on impact of macroeconomic indicators on the development of public debt in Slovakia. The aim of the paper was to identify those macroeconomic indicators which influence the most significantly public debt in Slovakia and to elaborate and verify simple model for public debt prediction. Research was based on the analysis of chosen macroeconomic indicators. Selection of macroeconomic indicators resulted from theoretical knowledge and study of various research papers. Authors used several scientific methods, such as content-causal analysis, comparison, mathematical and statistical methods, including simple linear regression. Macroeconomic indicators, which authors proved to be statistically significant, are GDP growth rate, openness of economy, size of public sector, government bond yields, and unemployment rate. Authors elaborated model of the public debt development in Slovakia by using a simple linear regression model. Regression model was calculated using the data for 1995-2016. Authors confirmed correctness of the model by using data for 2017. Research was limited by the fact, that there are limited data available for analysis (time series of 22 years) because of short existence of independent Slovakia. It will be necessary to continue with the research and to verify correctness of chosen indicators in longer period.
Keyword : public debt, macroeconomic indicators, linear regression model, prediction model, Slovakia, short-term period
How to Cite
Knapková, M., Kiaba, M., & Hudec, S. (2019). Impact of macroeconomic indicators on public debt of Slovak Republic. Journal of Business Economics and Management, 20(4), 734-753. https://doi.org/10.3846/jbem.2019.10184
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Ambler, S., & Bouakez, H., & Cardia, E. (2017). Does the crowding-in effect of public spending on private consumption undermine neoclassical models? Research in Economics, 71(3), 399-410. https://doi.org/10.1016/j.rie.2017.04.004
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Berggren, N., & Bjornskov, Ch. (2019). Regulation and government debt. Public Choice, 178(1-2), 153-178. https://doi.org/10.1007/s11127-018-0621-6
Blavy, R. (2006). Public debt and productivity (IMF Working Paper 235(16), pp. 1-27). https://doi.org/10.5089/9781451864953.001
Bohn, F. (2019). Political instablility and seigniorage: An inseparable couple – or a threesome with debt? Review of International Economics, 27(1), 347-366. https://doi.org/10.1111/roie.12379
Bundesministerium für Wirtschaft und Technologie (2010). Ein neues Verfahren für die wirtschafts-politische Koordinierung in Europa. Berlin: BMWi.
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Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the Euro area. European Economic Review, 56(7), 1392-1405. https://doi.org/10.1016/j.euroecorev.2012.06.007
Chen, C., & Yao, S., Hu, P., & Lin, Y. (2017). Optimal government investment and public debt in an economic growth model. China Economic Review, 45, 257-278. https://doi.org/10.1016/j.chieco.2016.08.005
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Csortos, O., & Szalai, Z. (2014). Early warning indicators: Financial and macroeconomic imbalances in Central and Eastern European Countries (MNB Working Paper 2, pp. 1-35).
Dawood, M., & Horsewood, N., & Strobel, F. (2017). Predicting sovereign debt crises: an early warning system approach. Journal of Financial Stability, 28, 16-28. https://doi.org/10.1016/j.jfs.2016.11.008
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Esteve, V., & Tamarit, C. (2018). Public debt and economic growth in Spain, 1851–2013. Cliometrica, 12(2), 219-249. https://doi.org/10.1007/s11698-017-0159-8
European Central Bank. (2010). Reinforcing economic governance in the Euro Area. Retrieved from http://www.ecb.int/pub/pdf/other/reinforcingeconomicgovernanceintheeuroareaen.pdf
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Ferrari, G. (2018). On the optimal management of public debt: A singular stochastic control problem. Siam Journal on Control and Optimization, 56(3), 2036-2073. https://doi.org/10.1137/16M1084870
Furceri, D., & Mourougane, A. (2010). The effects of fiscal policy on output: A DSGE analysis (OECD Economic Department Working Papers 770, pp. 1-33).
Goedl, M., & Zwick, Ch. (2018). Assessing the stochastic stability of public debt: the case of Austria. Empirica, 45(3), 559-585. https://doi.org/10.1007/s10663-017-9376-4
Gomez-Puig, M., & Sosvilla-Rivero, S. (2018). Public debt and economic growth: further evidence for the euro area. Acta Oeconomica, 68(2), 209-229. https://doi.org/10.1556/032.2018.68.2.2
Heise, M. (2011). Notwendigkeit und Ausgestaltung Makroökonomischer Überwachung im Euroraum. Wirtschaftsdienst, 91(1), 22-30. https://doi.org/10.1007/s10273-011-1166-1
Horváthová, L., Horváth, J., Gazda, V., & Kubák, M. (2012). Fiscal decentralization and public debt in the European Union. Lex Localis, 10(3), 265-276. https://doi.org/10.4335/171
Islami, M., & Kurz-Kim, J. R. (2014). A single composite financial stress indicator and its real impact in the Euro area. International Journal of Finance & Economics, 19(3), 204-211. https://doi.org/10.1002/ijfe.1483
Knedlik, T., & Schweinitz, G. (2012). Macroeconomic imbalances as indicators for debt crises in Europe. Journal of Common Market Studies, 50(5), 726-745. https://doi.org/10.1111/j.1468-5965.2012.02264.x
Kwon, G., McFarlane, L., & Robinson, W. (2006). Public debt, money supply, and inflation: A cross-country study and its application to Jamaica (IMF Working Paper 17 (06/121), pp. 1-39). https://doi.org/10.5089/9781451863819.001
Lammam, C., & MacIntyre, H. (2016). Public debt a threat to Canada. Winnipeg Free Press, A.9, 1-23.
Mazúrová, B., & Kollár, J. (2015). The importance of government spending in context of fiscal policy. In Proceedings of the 1st International Conference European Fiscal Dialog 2015: Current Issues of Fiscal Policy (pp. 109-117). Prague: Newton College.
Milesi-Ferretti, G. M., Perotti, R., & Rostagno, M. (2002). Electoral systems and public spending. Quarterly Journal of Economics, 67(1), 609-657. https://doi.org/10.1162/003355302753650346
Národná stratégia trvalo udržateľného rozvoja. (2001). Retrieved from http://hpur.vlada.gov.sk/data/files/5636_narodna-strategia-trvalo-udrzatelneho-rozvoja.pdf
Nayak, J., R., & Pandit, V. (2015). GDP growth and public debt: alternative scenarios. Journal of Economic Policy and Research, 11(1), 84-102. Retrieved from https://search.proquest.com/docview/1828144665?accountid=17223
Neck, R., Blueschke, D., & Weyerstrass, K. (2012). Macroeconomic Policies for Slovenia in the “Great Recession”. International Advances in Economic Research, 18(4), 345-366. https://doi.org/10.1007/s11294-012-9376-x
Ono, T., & Uchida, Y. (2018). Human capital, public debt, and economic growth: A political economy analysis. Journal of Macroeconomics, 57, 1-14. https://doi.org/10.1016/j.jmacro.2018.03.003
Oulton, N., & Sebastiá-Barriel, M. (2017). Effects of financial crises on productivity, capital and employment. Review of Income and Wealth, 63, 90-112. https://doi.org/10.1111/roiw.12253
Page, A. (2018). War, public debt and Richard Price’s Rational Dissenting radicalism. Historical Research, 91(251), 98-115. https://doi.org/10.1111/1468-2281.12215
Persson, T., Roland, G., & Tabellini, G. (2007). Electoral rules and government spending in parliamentary democracies. Quarterly Journal of Political Science, 20, 1-34. http://dx.doi.org/10.1561/100.00006019
Pescatori, A., Sandri, D., & Simon, J. (2014). Debt and growth: Is there a magic threshold? (IMF working paper 14/34, pp. 1-19). https://doi.org/10.5089/9781484306444.001
Poghosyan, T. (2018). How do financial cycles affect public debt cycles? Empirical Economics, 54(2), 425-460. https://doi.org/10.1007/s00181-016-1215-0
Real, A., Katsuyuki, N., & Tetsuo, O. (2018). Intergenerational policies, public debt, and economic growth: A politico-economic analysis. Journal of Public Economics, 166, 39-52. https://doi.org/10.1016/j.jpubeco.2018.08.006
Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a time of debt. American Economic Review, 100(2), 573-578. ttp://dx.doi.org/10.1257/aer.100.2.573
Roubini, N., & Sachs, J. (1989). Government spending and budget deficits in the industrial countries. Economic Policy, 4(8), 100-132. https://doi.org/10.2307/1344465
Salotti, S., & Trecroci, C. (2012). Even worse than you thought: The impact of public debt on aggregate investment and productivity. In DEGIT Conference Papers c017_020, DEGIT, Dynamics, Economic Growth, and International Trade. (pp. 1-23). https://doi.org/10.2139/ssrn.2033107
Savona, R., & Vezzoli, M. (2015). Fitting and forecasting sovereign defaults using multiple risk signals. Oxford Bulletin of Economics and Statistics, 77(1), 66-92. https://doi.org/10.1111/obes.12052
Sinha, P., Arora, V., & Bansal, V. (2011). Determinants of public debt for middle income and high income group countries using panel data regression (MPRA Paper 32079, pp. 1-28). Retrieved from https://mpra.ub.uni-muenchen.de/32079/1/MPRA_paper_32079.pdf
Stasavage, D. (2003). Public debt and the Birth of the democratic state: France and Great Britain 1688–1789. Cambridge University Press. https://doi.org/10.1017/CBO9780511510557
Vučkovic, V., & Sertic, M. B. (2013). The effect of political institutions on the size of government spending in European Union member states and Croatia. Financial Theory and Practice, 37(2), 161-179. https://doi.org/10.3326/fintp.37.2.2
Akitoby, B., & Binder, A., & Komatsuzaki, T. (2017). Inflation and public debt reversals in the G7 countries. Journal of Banking and Financial Economics, 1(7), 28-50. https://doi.org/10.7172/2353-6845.jbfe.2017.1.2
Ambler, S., & Bouakez, H., & Cardia, E. (2017). Does the crowding-in effect of public spending on private consumption undermine neoclassical models? Research in Economics, 71(3), 399-410. https://doi.org/10.1016/j.rie.2017.04.004
Baum, A., Checherita-Westphal, C., & Rother, P. (2012). Debt and growth: new evidence for the Euro area (ECB Working Paper 1450). Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecb-wp1450.pdf?72bd167ee00401965e42c0cc0a949f78
Berben, R. P., & Brosens, T. (2007). The impact of government debt on private consumption in OECD countries. Economics Letters, 94(2), 220-225. https://doi.org/10.1016/j.econlet.2006.06.033
Berggren, N., & Bjornskov, Ch. (2019). Regulation and government debt. Public Choice, 178(1-2), 153-178. https://doi.org/10.1007/s11127-018-0621-6
Blavy, R. (2006). Public debt and productivity (IMF Working Paper 235(16), pp. 1-27). https://doi.org/10.5089/9781451864953.001
Bohn, F. (2019). Political instablility and seigniorage: An inseparable couple – or a threesome with debt? Review of International Economics, 27(1), 347-366. https://doi.org/10.1111/roie.12379
Bundesministerium für Wirtschaft und Technologie (2010). Ein neues Verfahren für die wirtschafts-politische Koordinierung in Europa. Berlin: BMWi.
Caner, M., Grennes, T., & Koehler-Geib, F. (2010). Finding the tipping point – When sovereign debt turns bad (Policy Research Working Paper 5391, pp. 31-71). The World Bank. https://doi.org/10.1596/1813-9450-5391
Challe, E., Charpe, M., Ernst, E., & Ragot, X. (2011). Countercyclical unemployment benefits and unemployment fluctuations. International Labour Organization. Retrieved from http://ilo.org/wcmsp5/groups/public/---dgreports/---inst/documents/genericdocument/wcms_192632.pdf
Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the Euro area. European Economic Review, 56(7), 1392-1405. https://doi.org/10.1016/j.euroecorev.2012.06.007
Chen, C., & Yao, S., Hu, P., & Lin, Y. (2017). Optimal government investment and public debt in an economic growth model. China Economic Review, 45, 257-278. https://doi.org/10.1016/j.chieco.2016.08.005
Choa, D., & Rhee, D. E. (2013). Nonlinear effects of government debt on private consumption: Evidence from OECD countries. Economics Letters, 121(3), 504-507. https://doi.org/10.1016/j.econlet.2013.10.013
Cournède, B. (2010). Gauging the impact of higher capital and oil costs on potential output. (OECD Economic Department Working Papers 789, pp. 1-10).
Csortos, O., & Szalai, Z. (2014). Early warning indicators: Financial and macroeconomic imbalances in Central and Eastern European Countries (MNB Working Paper 2, pp. 1-35).
Dawood, M., & Horsewood, N., & Strobel, F. (2017). Predicting sovereign debt crises: an early warning system approach. Journal of Financial Stability, 28, 16-28. https://doi.org/10.1016/j.jfs.2016.11.008
D’Erasmo, P., & Mendoza, E. G. (2018). History remembered: Optimal sovereign default on domestic and external debt (NBER Working Paper No 25073). National Bureau of Economic Research. Retrieved from https://www.nber.org/papers/w25073
Di Bartolomeo, G., Di Pietro, M., Saltari, E., & Semmler, W. (2018). Public debt stabilization: the relevance of policymakers’ time horizons. Public Choice, 177(3-4), 287-299. https://doi.org/10.1007/s11127-018-0584-7
Esteve, V., & Tamarit, C. (2018). Public debt and economic growth in Spain, 1851–2013. Cliometrica, 12(2), 219-249. https://doi.org/10.1007/s11698-017-0159-8
European Central Bank. (2010). Reinforcing economic governance in the Euro Area. Retrieved from http://www.ecb.int/pub/pdf/other/reinforcingeconomicgovernanceintheeuroareaen.pdf
European Commission. (2010). Report on Greek Government. Deficit and debt statistics. Retrieved from https://ec.europa.eu/eurostat/documents/4187653/6404656/COM_2010_report_greek/c8523cfa-d3c1-4954-8ea1-64bb11e59b3a
Eurostat. (n.d.). Retrieved from https://ec.europa.eu/eurostat/home
Eusepi, G., & Wagner, R. E. (2017). Public debt: An illusion of democratic political economy. Edward Elgar Publishing. https://doi.org/10.4337/9781786438041
Ferrari, G. (2018). On the optimal management of public debt: A singular stochastic control problem. Siam Journal on Control and Optimization, 56(3), 2036-2073. https://doi.org/10.1137/16M1084870
Furceri, D., & Mourougane, A. (2010). The effects of fiscal policy on output: A DSGE analysis (OECD Economic Department Working Papers 770, pp. 1-33).
Goedl, M., & Zwick, Ch. (2018). Assessing the stochastic stability of public debt: the case of Austria. Empirica, 45(3), 559-585. https://doi.org/10.1007/s10663-017-9376-4
Gomez-Puig, M., & Sosvilla-Rivero, S. (2018). Public debt and economic growth: further evidence for the euro area. Acta Oeconomica, 68(2), 209-229. https://doi.org/10.1556/032.2018.68.2.2
Heise, M. (2011). Notwendigkeit und Ausgestaltung Makroökonomischer Überwachung im Euroraum. Wirtschaftsdienst, 91(1), 22-30. https://doi.org/10.1007/s10273-011-1166-1
Horváthová, L., Horváth, J., Gazda, V., & Kubák, M. (2012). Fiscal decentralization and public debt in the European Union. Lex Localis, 10(3), 265-276. https://doi.org/10.4335/171
Islami, M., & Kurz-Kim, J. R. (2014). A single composite financial stress indicator and its real impact in the Euro area. International Journal of Finance & Economics, 19(3), 204-211. https://doi.org/10.1002/ijfe.1483
Knedlik, T., & Schweinitz, G. (2012). Macroeconomic imbalances as indicators for debt crises in Europe. Journal of Common Market Studies, 50(5), 726-745. https://doi.org/10.1111/j.1468-5965.2012.02264.x
Kwon, G., McFarlane, L., & Robinson, W. (2006). Public debt, money supply, and inflation: A cross-country study and its application to Jamaica (IMF Working Paper 17 (06/121), pp. 1-39). https://doi.org/10.5089/9781451863819.001
Lammam, C., & MacIntyre, H. (2016). Public debt a threat to Canada. Winnipeg Free Press, A.9, 1-23.
Mazúrová, B., & Kollár, J. (2015). The importance of government spending in context of fiscal policy. In Proceedings of the 1st International Conference European Fiscal Dialog 2015: Current Issues of Fiscal Policy (pp. 109-117). Prague: Newton College.
Milesi-Ferretti, G. M., Perotti, R., & Rostagno, M. (2002). Electoral systems and public spending. Quarterly Journal of Economics, 67(1), 609-657. https://doi.org/10.1162/003355302753650346
Národná stratégia trvalo udržateľného rozvoja. (2001). Retrieved from http://hpur.vlada.gov.sk/data/files/5636_narodna-strategia-trvalo-udrzatelneho-rozvoja.pdf
Nayak, J., R., & Pandit, V. (2015). GDP growth and public debt: alternative scenarios. Journal of Economic Policy and Research, 11(1), 84-102. Retrieved from https://search.proquest.com/docview/1828144665?accountid=17223
Neck, R., Blueschke, D., & Weyerstrass, K. (2012). Macroeconomic Policies for Slovenia in the “Great Recession”. International Advances in Economic Research, 18(4), 345-366. https://doi.org/10.1007/s11294-012-9376-x
Ono, T., & Uchida, Y. (2018). Human capital, public debt, and economic growth: A political economy analysis. Journal of Macroeconomics, 57, 1-14. https://doi.org/10.1016/j.jmacro.2018.03.003
Oulton, N., & Sebastiá-Barriel, M. (2017). Effects of financial crises on productivity, capital and employment. Review of Income and Wealth, 63, 90-112. https://doi.org/10.1111/roiw.12253
Page, A. (2018). War, public debt and Richard Price’s Rational Dissenting radicalism. Historical Research, 91(251), 98-115. https://doi.org/10.1111/1468-2281.12215
Persson, T., Roland, G., & Tabellini, G. (2007). Electoral rules and government spending in parliamentary democracies. Quarterly Journal of Political Science, 20, 1-34. http://dx.doi.org/10.1561/100.00006019
Pescatori, A., Sandri, D., & Simon, J. (2014). Debt and growth: Is there a magic threshold? (IMF working paper 14/34, pp. 1-19). https://doi.org/10.5089/9781484306444.001
Poghosyan, T. (2018). How do financial cycles affect public debt cycles? Empirical Economics, 54(2), 425-460. https://doi.org/10.1007/s00181-016-1215-0
Real, A., Katsuyuki, N., & Tetsuo, O. (2018). Intergenerational policies, public debt, and economic growth: A politico-economic analysis. Journal of Public Economics, 166, 39-52. https://doi.org/10.1016/j.jpubeco.2018.08.006
Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a time of debt. American Economic Review, 100(2), 573-578. ttp://dx.doi.org/10.1257/aer.100.2.573
Roubini, N., & Sachs, J. (1989). Government spending and budget deficits in the industrial countries. Economic Policy, 4(8), 100-132. https://doi.org/10.2307/1344465
Salotti, S., & Trecroci, C. (2012). Even worse than you thought: The impact of public debt on aggregate investment and productivity. In DEGIT Conference Papers c017_020, DEGIT, Dynamics, Economic Growth, and International Trade. (pp. 1-23). https://doi.org/10.2139/ssrn.2033107
Savona, R., & Vezzoli, M. (2015). Fitting and forecasting sovereign defaults using multiple risk signals. Oxford Bulletin of Economics and Statistics, 77(1), 66-92. https://doi.org/10.1111/obes.12052
Sinha, P., Arora, V., & Bansal, V. (2011). Determinants of public debt for middle income and high income group countries using panel data regression (MPRA Paper 32079, pp. 1-28). Retrieved from https://mpra.ub.uni-muenchen.de/32079/1/MPRA_paper_32079.pdf
Stasavage, D. (2003). Public debt and the Birth of the democratic state: France and Great Britain 1688–1789. Cambridge University Press. https://doi.org/10.1017/CBO9780511510557
Vučkovic, V., & Sertic, M. B. (2013). The effect of political institutions on the size of government spending in European Union member states and Croatia. Financial Theory and Practice, 37(2), 161-179. https://doi.org/10.3326/fintp.37.2.2