The impact of public debt on economic growth in Albania

Etleva Bajrami
JEL codes: 
H63 - Debt; Debt Management; Sovereign Debt, H72 - State and Local Budget and Expenditures, H74 - State and Local Borrowing, O11 - Macroeconomic Analyses of Economic Development.
Public debt provides the necessary funds for governments to enable economic incentives in various sectors or industries. Public debt enables strategic investments that benefit the entire economy, which would otherwise be difficult to achieve. By using public debt governments do not reduce government spending in case of insufficient revenues. Public debt has become commonplace in today governments. For this reason, public debt has been in the attention of policymakers as well as experts of economies in recent decades. The focus of this study is the level of public debt and its impact on economic growth in Albania. The purpose of this study is to find the relation between public debt and GDP per capita. The first objective is to analyze the relation of total public debt with GDP per capita and the second objective is to analyze the external debt relation with GDP per capita. To achieve the paper objectives, the analysis is based on a model build with secondary data using the least-squares method. In this paper, it has been concluded that total public debt has a positive impact on GDP growth per capita, while there is a negative relationship between external public debt and GDP per capita.
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