Could Indebtedness Influence the Economic Growth? Estimation for EU Countries

Abstract:

The aim of this paper is to examine if public debts could affect growth of per capita GDP based on empirical results from 23 EU countries. Annual data used for analysis are from years 1995-2014. EU countries were examined together but also were divided into two group based on the time of joining the European Union. This selection enables comparison between core member states and countries which joined the EU later. Augmented endogenous growth model was used as theoretical model and non-linear impacts of debt levels were checked. Fixed-effect panel re-gression was used as a method of the research. Results showed significant outcomes which are contradictory to the previous well-known studies with similar topic.