engleski

The Dynamics of Fiscal Policy Transmission Mechanism and the Effect on Economic Growth

Our results across all models indicate a statistically significant non-linear impact of public debt ratios on the annual GDP per capita growth rate for ‘old’ member states/developed and ‘new’ member states/emerging countries included in our sample. The calculated debt-to-GDP turning point, where the positive effect of accumulated public debt inverts into a negative effect, is roughly between 80% and 90% for the “old” member states (between 90% and 94% for developed countries). For the “new” member states the debt-to-GDP turning is lower, namely between 53% and 54% (for emerging countries between 44% and 45%). Therefore, we can confirm both our hypothesis that the threshold value for ‘new’ member states/emerging countries is lower than for the ‘old’ member states/developed countries in our sampleSignificant increase in private debt during the period between 2003–2007, especially pronounced in PIIGS countries and “new” member states. In contrast, during the same period public debt shrank in most EU countries due to a positive growth performance. In the period 2007-2012 on average the biggest accumulation of debt occurred in the public sector due to debt migration and deleveraging in the private sector. We may conclude that private sector indebtedness played a more pronounced role on economic growth in ‘new’ member states, whereas the accumulation of public debt has a stronger effect on the subsequent growth performance during the crisis.

fiscal policy; asymmetric effects; business cycle

nije evidentirano