THE IMPACT OF PUBLIC EXPENDIRURE AND PUBLIC DEBT ON ECONOMIC GROWTH DECLINE

Dalibor Šare; Danko Kosorić; Dejan Tošev

doi:10.59864/Oditor82503DS

Authors

Dalibor Šare Belgrade banking Academy Author https://orcid.org/0009-0006-8366-7207
Danko Kosorić Belgrade banking academy Author https://orcid.org/0009-0003-9964-987X
Dejan Tošev Belgrade banking academy Author https://orcid.org/0009-0003-1542-7672

DOI:

https://doi.org/10.59864/Oditor82503DS

Keywords:

economic growth, public expenditure, public debt, southeast Europe

Abstract

This study analyzes the impact of public expenditure on economic growth in Southeast European countries, using data for Serbia, Bosnia and Herzegovina, Croatia, Montenegro, North Macedonia, Romania, Bulgaria, Albania, and Greece for the period from 2005 to 2021. The empirical analysis was conducted using Prais-Winsten regression with panel-corrected standard errors (PCSE) to correct for heteroskedasticity, autocorrelation, and cross-sectional dependence. The results show that an increase in public expenditure positively affects economic growth, while a high level of public debt negatively impacts growth. However, the interaction effect between public expenditure and high debt is not statistically significant, suggesting that public expenditure in countries with high debt does not have a pronounced negative effect on economic growth. These findings highlight the need for more careful consideration of fiscal policies in high-debt countries, particularly in the context of military expenditure.

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