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Impact of External Debt on Economic Growth in Western Balkan Countries

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  • Altin Hoti
  • Aranit Shkurti
  • Scheherazade Rehman

Abstract

This paper investigates the average impact of government debt on long-term GDP growth in four Western Balkan countries of Albania, Serbia, Macedonia, and Bosnia & Herzegovina over a 23-year period from 1997-2019. It examines the use of financing through debt on short- and long-term economic growth for these economies using a dynamic common correlated effects model with heterogeneous coefficients. The model's methodology estimation mimics Chudik and Pesaran and the pooled mean group estimator is used. The conclusion of this study, with respect to the average impact of government debt on long-term GDP growth in the four Western Balkan countries, is consistent with the literature in that in the long-term external debt does not contribute to long-term growth and, in fact, tends to have a negative impact. The COIVD-19 pandemic has exacerbated the long-term growth outlook for the four Western Balkan countries.

Suggested Citation

  • Altin Hoti & Aranit Shkurti & Scheherazade Rehman, 2022. "Impact of External Debt on Economic Growth in Western Balkan Countries," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, March.
    • Handle: RePEc:bjz:ajisjr:2206
    DOI: https://doi.org/10.36941/ajis-2022-0045
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    References listed on IDEAS

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