Analyzing the Snowball Effect on Public Debt Dynamics and Its Determinants: The Case of North Macedonia

Abstract: Maintaining healthy public finances is essential for financial stability and economic growth. This study examines Macedonian public debt dynamics from 2002 to 2023, focusing on the primary budget balance, the interest-growth differential (snowball effect), and stock-flow adjustments. The snowball effect, where the debt ratio changes based on whether GDP growth surpasses or lags behind interest rates, is emphasized. Recent challenges include sluggish economic growth due to declining external demand and rising food and energy prices, coupled with increasing interest rates, exacerbating the snowball effect. Using the Ordinary Least Squares (OLS) method, the study analyzes how macroeconomic variables like foreign direct investment, trade openness, and unemployment, alongside institutional factors such as government effectiveness and corruption, influence debt dynamics. Policy recommendations stress the need for enhanced fiscal discipline, measures to stimulate economic growth, and improved institutional frameworks to mitigate the adverse effects of the snowball effect on public debt.

10th International Scientific Conference ERAZ 2024 – Selected Papers: KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT,  hybrid – online, virtually and in person, Lisbon, Portugal, June 6, 2024

ERAZ Selected Papers published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ERAZ conference partners: Faculty of Logistics, University of Maribor, Maribor (Slovenia); University of National and World Economy – UNWE, Sofia (Bulgaria); Center for Political Research and Documentation (KEPET), Research Laboratory of the Department of Political Science of University of Crete (Greece); Institute of Public Finance – Zagreb (Croatia); Faculty of Tourism and Hospitality Ohrid, University of St. Kliment Ohridski from Bitola (North Macedonia)

ERAZ Conference 2024 Selected Papers: ISBN 978-86-80194-87-5, ISSN 2683-5568, DOI: https://doi.org/10.31410/ERAZ.S.P.2024

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-Non-Commercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission. 

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