Debt Sustainability Issues in Central and East European Countries

Abstract

The goal of this study is to investigate debt sustainability in ten Central and East European countries over the period 1998–2015. We calculate the stabilized debt ratios, turning points, and debt limits using estimates of a fiscal reaction function in its cubic form. We use a balanced panel with fixed effects. We find that in 2017, the public debt exceeded the stabilized debt ratio in all the countries examined. However, the public debt is stable and is below the turning point. Moreover, governments are still far from the debt thresholds of “fiscal fatigue.”