The Influence of Public Debt on Performance: Lesson from Romanian Counties

Abstract

A financial crisis has significant consequences on governmental resources. In the recent decade, especially after the 2007 global financial crisis, numerous studies on public debt have emerged in the literature. Moreover, an important part of a country’s public debt is the level of public debt registered by regional authorities such as counties. For this reason, the article empirically investigates the impact of local public debt on the performance of six Romanian counties. By using annual data spanning the period 2007–2016, the impact is analyzed through a panel data approach. Overall results suggested that local public debt had a negative impact on the performance of local government authorities. The empirical analysis offers considerable support in relation to the sovereign debt crisis started in 2010.

Keywords

• public debt
• repayment capacity
• performance