Debt Sustainability Issues in the Central and Eastern European Countries

15 Pages Posted: 1 Jul 2016

See all articles by Bettina Bökemeier

Bettina Bökemeier

Bielefeld University - Department of Business Administration and Economics

Andreea Maria Stoian

Bucharest Academy of Economic Studies

Date Written: June 1, 2016

Abstract

The aim of this study is to investigate debt sustainability in ten Central and Eastern European countries over 1997-2013. Following Burger (2012), we calculate the stabilized debt using the estimates of a fiscal reaction function for a balanced panel with fixed effects. Comparing the stabilized, the effective debt ratios and the historical averages, we can assess debt sustainability in short and in long run. We find that current debt ratio as of 2015 for Bulgaria and Romania is not sustainable. The debt dynamics of Bulgaria is stable whilst for Romania's case the debt trajectory indicates unstable dynamics. As for historical averages of debt ratios, Bulgaria could encounter debt sustainability issues also in the long run.

Keywords: Public debt, Fiscal Sustainability, Fiscal Reaction Function, CEECs economies

JEL Classification: H63, E62

Suggested Citation

Bökemeier, Bettina and Stoian, Andreea Maria, Debt Sustainability Issues in the Central and Eastern European Countries (June 1, 2016). Bielefeld Working Papers in Economics and Management No. 07-2016, Available at SSRN: https://ssrn.com/abstract=2803107 or http://dx.doi.org/10.2139/ssrn.2803107

Bettina Bökemeier

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

Andreea Maria Stoian (Contact Author)

Bucharest Academy of Economic Studies ( email )

Piata Romana, No.6
Bucharest
Romania

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