Abstract
An analysis of various research papers reveals that an increase in public debt has helped nations to restart economic growth; therefore, the research on public debt is still urgent and relevant.The aim of the present research is to examine trends and the implications of change in the public debt of Latvia.The research results revealed that over a ten-year period (2009-2018), the government budget of Latvia had a surplus only in one year (2016), which was due to the fact that the growth rate of budgetary revenues exceeded that of the national economy. The research results also revealed that public debt explicitly had more negative than positive implications. The positive implications involve increases in income for the population (interest payments on debt securities) and revenue for the government budget (to cover expenditures). The negative implications of public debt for the national economy mostly involve a potential downgrade of the country’s credit rating, which could lead to difficulties in raising funds during a crisis.The research employed the following methods: monographic, induction and deduction, graphical, comparison, a sociological research method – expert surveying – and statistical analysis.
Highlights
A number of research studies indicate that public debt can both stimulate and hinder economic development (Ludvigson, 1996)
Semjonova points out that public debt always plays a key role in any country’s macroeconomic system. This could be explained by the fact that the creation, servicing and repayment of public debt make a large impact on the state of public finances, cash flow, the investment environment and the consumption pattern as well as the development of international relations (Semjonova, 2017)
The basic cause of public debt is government budget deficits, yet the size of it is determined by many other factors, e.g. inflation
Summary
A number of research studies indicate that public debt can both stimulate and hinder economic development (Ludvigson, 1996). An analysis of various research papers reveals that an increase in public debt has helped nations to restart economic growth; the research on public debt is still urgent and relevant. In her monograph Government Debt: an Evaluation of Financial Security and Optimal Policy Selection, researcher N. Semjonova points out that public debt always plays a key role in any country’s macroeconomic system This could be explained by the fact that the creation, servicing and repayment of public debt make a large impact on the state of public finances, cash flow, the investment environment and the consumption pattern as well as the development of international relations (Semjonova, 2017). The research employed the following methods: monographic, induction and deduction, graphical, comparison, a sociological research method – expert surveying – and statistical analysis
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