Author(s): Piotr Misztal
Abstract: The relatively high sizes of public debts in many of the world’s member states have led to frequent debates concerning the influence of public debt on economic growth. Analyzing economic literature it can be seen, that theoretical and empirical considerations on this topic are divided into three main parties. The first part of analyzes is the work of the Keynesians, which emphasizes that the budget deficit as well as the public debt positively affects the economic development of the country, mainly through the impact of the budget expenditure multiplier. The opposite view on budget deficits and public debt is represented by the neoclassical school, who argue that the budget deficit and public debt can have negative impact on economic growth. Conversely, proponents of the Ricardian equivalence concept believe that budget deficits and public debt are neutral for economic growth. These three mentioned above approaches to the budget deficit and public debt problem have led to many debates at home and abroad about the importance of budget deficit and public debt in the process of economic growth and economic development of the country. The main objective of the study is to determine the impact of the foreign debt and home debt on economic activity of the country, based on the example of the 27 member countries of the European Union (without United Kingdom) in the period 2006-2017. The statistics came from the European Statistical Office (Eurostat) and International Monetary Fund database (World Economic Outlook).
Keywords: public debt, economic growth, foreign debt
DOI: 10.37394/23207.2021.18.21WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 18, 2021, Art. #21