Economic Themes (2025) 63 (4) 2,
Abstract: This paper investigates the impact of inflation on the level of public debt, expressed as a percentage of GDP, in Southeast European countries during the period from 2008 to 2023. The research was conducted on a sample of eight countries using panel data regression analysis. Special emphasis was placed on distinguishing between the current and delayed effects of inflation, with two control variables included: interest rates on public debt and real GDP growth. The random effects model (REM), selected as the most methodologically suitable based on the Breusch-Pagan LM test and Hausman test, shows that inflation from the previous period has a negative and statistically significant impact on public debt, while current inflation is not significant. The interest rate on public debt was found to be highly significant and positively correlated with debt levels, while real GDP growth did not have a statistically significant effect. The results suggest that inflation may play a role in the relative reduction of fiscal burden, but that responsible debt management and strengthening institutional frameworks remain key factors for maintaining fiscal stability and public debt sustainability in the region.
Keywords: public debt; inflation; Southeast Europe; interest rates on public debt; real GDP growth
Abstract: This paper investigates the impact of inflation on the level of public debt, expressed as a percentage of GDP, in Southeast European countries during the period from 2008 to 2023. The research was conducted on a sample of eight countries using panel data regression analysis. Special emphasis was placed on distinguishing between the current and delayed effects of inflation, with two control variables included: interest rates on public debt and real GDP growth. The random effects model (REM), selected as the most methodologically suitable based on the Breusch-Pagan LM test and Hausman test, shows that inflation from the previous period has a negative and statistically significant impact on public debt, while current inflation is not significant. The interest rate on public debt was found to be highly significant and positively correlated with debt levels, while real GDP growth did not have a statistically significant effect. The results suggest that inflation may play a role in the relative reduction of fiscal burden, but that responsible debt management and strengthening institutional frameworks remain key factors for maintaining fiscal stability and public debt sustainability in the region.
Keywords: public debt; inflation; Southeast Europe; interest rates on public debt; real GDP growth
