The impact of public debt on economic growth : evidence from Kosovo (2007-2019)

Abstract

Introduction: The Republic of Kosovo, as a new democratic state and independent in 2008, has managed to create a stable financial system over the last decade. The importance of this scientific research lies in the fact that through this study we understand the impact of public debt on economic growth, debt management by past governments and the destination of these funds in capital investments as internal, external and very important sources of financing the economy of Kosovo.

Purpose: This scientific paper aims to analyze the impact of public debt on Kosovo's economic growth during the period 2007-2019. Through various analyzes related to the country's public debt, we will be able to conclude the effect of public debt on Kosovo's economic growth. To analyze the public debt of the country, the following variables are included: GDP as a dependent variable, while as independent variables are the internal debt (DD) and external debt (EXD) of the Republic of Kosovo.

Methodology: This paper is mainly based on the collection of data from secondary sources which are provided by the annual public debt reports published by the Ministry of Finance, the reports of the Central Bank of Kosovo and the World Bank in a period of 13 years, while the review of the literature in terms of content includes studies of various authors regarding the impact of public debt on economic growth. The collected data will be analyzed, processed and interpreted through econometric models using the STATA software.

Findings: Based on the results and findings of the study of this scientific research we can conclude that public debt has a positive impact on economic growth, implying that the low level of public debt has ensured financial stability at the national level and the use of debt to a large extent for capital investments has caused a positive substantive impact on the economic growth of the country during this period.

Practical implications: Through the results of this study, we recommend that for the needs of financing the economy and capital projects, the Republic of Kosovo has the opportunity to use public debt for economic needs up to the allowable limit while maintaining financial and macroeconomic stability of the country.

Originality/Value: This scientific research presents real and sustainable findings regarding the public debt of the Republic of Kosovo as an impact on economic growth for the analyzed period.