Determinants of public debt. The case of the European Union countries

Abstract

Starting from the idea that public debt can be necessary for countries’ development but beyond a certain threshold it becomes a burden and affects their future, this study aims to identify which are the major determinants of public debt and how are they changing its level. We have analysed the 28 countries from EU during the period 1995 - 2017 and reached the conclusion that the debt to GDP ratio is significantly and positively influenced by the previously accumulated public debt, but also by unemployment and population size, while real GDP growth, FDI inflows, gross capital formation and trade balance have significant impacts on limiting the public debt.

Keywords

• public debt
• economic growth
• unemployment
• gross capital formation
• trade