IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH FOR THE CASE OF ALBANIA

The purpose of this study is to investigate the long- and short-run impact of public debt as well as government expenditures on economic growth in Albania, using annual time series data, covering the period 1993–2021. To accomplish this task is used the Vector Error Correction Method (VECM). The results of the study reveal that between public debt and economic growth exists an inverse long-run relationship. In the long run, public debt has a negative impact on GDP growth, whereas government expenditures positively affect the economic growth. Regarding the short run results there exists a positive relationship between public debt and economic growth. The evidence of this paper will contribute to the existing literature regarding the relationship between these variables and can help policymakers to undertake sound policy measures.

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