Journal of Knowledge Management, Economics and Information Technology

Since the half of the last century the importance of public debt as an instrument of economic policy, is increasing more and more. Public debt as a form of financing for meeting the needs of state, besides being present in developed industrial countries, it is used a lot in developing countries or countries in transition. This is because these countries face with a lot of economic and social problems and they use public debt as one of the forms to overcome these difficulties, with a tendency of economic growth, financial stability and raising the standard and economic welfare of society.

All states apart from the public revenue collection as a source for coverage of public expenditure, they also need other financial resources, because very often most countries cannot collect sufficient budgetary revenues to meet all the budget expenditures. Therefore, this is one reason why the public debt is created.

Among economists there are always debates and dilemma about how much optimum percentage of public debt should be so that it will not affect the obstruction of a country’s economic development. But in order this not to happen then there must be proper management of the public debt in order for it to be destined for appropriate projects which will contribute to the economic growth and development.

The Republic of Kosovo like other countries is burdened with public debt. Regarding the history of debt it is known that Kosovo had a public debt inherited from the time of former Yugoslavia amounting to 220.6 million euros. Kosovo got this fund on behalf of the debt from the World Bank. Eventually, in 2009 Kosovo managed to begin to apply the services for processing the external debt, which according to the agreement, the debt must be returned to the World Bank until 2031. In Kosovo even the internal debt started to function, which began to be realized through the issuing of bonds. So in January 2012 the first bond auction was held.

Sustainable economic growth is essential for a country’s economic system, especially in developing countries or those in transition, such as the Republic of Kosovo. Economic growth, among other things, will also affect the creation of new jobs for the population who are able to work, so that through employment to improve the standard of living and economic welfare of the population. An optimal growth leads to stability of macroeconomic objectives.

According to what the Law for Public Debt in Kosovo says, the limit of the public debt should not exceed the level of 40 percent of Gross Domestic Product (GDP) and in the end of 2015 it turned out to be 28.50%(Annual Report 2015, CBK, p. 31) of the GDP.
Therefore, this study aims to analyze the impact of the public debt on economic growth of the Republic of Kosovo from the period when the public debt as a form of financing started to be applied up to the end of 2015, as well as the factors that affect the determination of these two indicators.

  Analysis on the Impact of Public Debt on Economic Growth Case of Republic of Kosovo (1.4 MiB, 1,733 hits)

This paper tries to design the proper framework for highlighting the importance of globalization and the meaning of it being the engine for economic growth. Globalization and economic growth go hand in hand and are empowered by the Solow’s model influence, which is translated as sustainable economic development, which also could be accelerated by using the Total Factors Productivity synergic relation. The competitive advantage of globalization is growth sustained and accelerated by factors that are empowered by the need to evolve of corporations and spread towards the entire global market, these being the part emphasized in the second part of this paper and also that wants to complementary complete globalization’s big picture.

  Globalization – Engine for Economic Growth (644.7 KiB, 3,077 hits)

The economic growth is the most important indicator in determining the welfare of a country, thus affecting the growth of income level. The economic growth is one of the indicators most used by economists, governments and international economic organizations and is also considered as synonymous with development.
Economic growth is an indicator of the performance of the management of economic resources of the period by identifying the economy of a country.
Given the great importance that has the economic growth for a country, the study makes an analysis of the process of economic growth in Albania after 1990 and until our days, by determining which the main sources that have provided growth were. But, despite the problems arising in this regard, the study currently is trying to show which should be the new model that will provide long-term economic growth of the country.

  The Factors that Affect the Economic Growth in Albania (827.8 KiB, 2,967 hits)

With an employment rate among young people (under 25 years) of 23,3% Romania has to find a solution for solving this problem in short terms , otherwise we can face a constant migration wave of young people who can’t find a job in our country. This article presents the current status on labor market in Romania and in the same time tries to raise the awareness why do we need Youth Guarantees in our country , how important are the policy developed at European Union level to eradicate the unemployment at young ages?. We focused on the general background of this type of policies in European Union since its creations and finishing with the importance of this Youth Guarantee scheme, the way it can be implemented , costs and benefits , successful stories and an interpretation of the forecast of Romanian youth labor force until 2030 and of course some final conclusions and recommendations.

  Is Youth Guarantee a Solution for Increasing Employment Among Young Romanians? (721.3 KiB, 1,974 hits)

The end of the first decade of the twenty-first century will be remembered by appearance of one of the greatest economic crisis. This time, it had a global character. The crisis has been appeared, almost unexpectedly, in the middle of 2007 in the US, but very soon it was transferred to other countries in the world as well. Very likely, it will last durably, with wide devastating consequences. The current economic crisis has made the existing unfavorable situation more complex and deepened the present imbalances and risks. The economic and financial crisis led to a strong increase in the public debt in the euro area countries, the United Kingdom, the United States and Japan. Moreover, without a change of policy, the public debt will continue to expand in most of developing countries such as Albania.
Public debt challenges are a major recurring concern across the globe. Today many countries face the prospect of high and unsustainable public debt levels amid a weak economic recovery caused by the global financial crisis that started in 2007. The impact of the crisis on public debt was immediate, severe and with potential long-lasting negative effects due to its housing roots and global reach. The basic aim of this article is to consider the effect of the current financial crisis on the movements and sustainability of the public debt in the period up to 2013.
The paper will try to analyze also the effects that public debt has on the economic growth through the examination of the main data used in this study. The results are consistent with the existing literature that has found a negative correlation between public debt and economic growth.

  Financial Crisis Effect on Public Debt in Western Balkans Countries (690.2 KiB, 3,390 hits)

Emerging economies have grown much faster than the advanced countries during the past decades. This study investigates the relationship between economic growth and electricity consumption in the emerging economies during the period 1970-2011 by using Pedroni, Kao and Johansen co-integration tests and Granger causality tests. We found that electricity consumption had a positive impact on the economic growth and there was bidirectional causality between economic growth and electricity consumption.

  Electricity Consumption and Economic Growth in Emerging Economies (288.0 KiB, 7,950 hits)

In this study we assess the role of FDI inflow on the post-communist Albania’s economic growth. The country has experienced a satisfactory growth rate during the transition period to market economy that followed the collapse of communism in the early 1990s. The opening of the country to the foreign world has been accompanied by a significant inflow of FDI that are found to have played a growth promoting role. The analysis is performed using annual data series from 1992 to 2012 obtained from the WDI. The ARDL bounds testing results indicate a significant long-term relationship between the country’s economic growth and the inflow of FDI. More specifically, a 10% increase in the FDI inflow is accompanied by a 1.41% increase of its economic growth rate. This finding implies that the country’s policymakers should try to create a favourable climate for FDI inflow to accelerate its economic growth.

  The Role of FDI Inflow on the Post - Communist Albania’s Economic Growth (337.5 KiB, 2,688 hits)

This paper presents an attempt to examine the causal relationships between economic growth and social development in Saudi Arabia between 1980 and 2011. For that, statistical and econometric techniques, such as unit root test, cointegration and Granger Engels causality through Vector Error Correction Model (VECM) are applied.

Based on the aggregation of several indicators to construct a single social composite index, results show that there is significant long run causality from social development to economic growth. This indicates that trickle-up hypothesis is more active dominantly and that development strategies in Saudi Arabia have succeeded to reach significant social development enough to cause economic growth in the long run.

  Cointegration and Causality between Economic Growth and Social Development in Saudi Arabia (322.9 KiB, 4,016 hits)

According to Mankiw (2000), fiscal policy in major macroeconomic models adversely affects the behavior of private agents as consumers and firms and they affect economic growth through investment and savings decisions. Increasing government spending will increase the aggregate demand for goods and services and money demand in the money market leading to an increase of interest rates while markets tend towards equilibrium. The increased interest rates affect negatively the level of private investment. To assess the effect of fiscal policy on economic growth generally are used the endogenous growth models, which include technological progress as an integrated part of this model. These models were called endogenous because they were taking into account long-term economic growth and were using endogenous mechanisms to explain its main source which is the technological progress. Endogenous growth models developed by Barro (1990), Mendosa, Milesi-Ferreti and Asea (1997) or even by other economists, predict that the fiscal policy can affect the level of product and the long run economic growth. This conclusion is analyzed in the theory of Barro (1990), which extends the model by including the fiscal policy. The Barro’s model is the model used in this paper to analyze the effect of the fiscal policy on economic growth in the case of Albania. The empirical work shows that all the variables, except inflation which according to theoretical expectations should have a negative effect, affect positively the economic growth. This positive relation between these variables can be explained by investments in infrastructure and other priority sectors that the government has done during all this period.

  Empirical Evidence of Fiscal Policy Impact on Endogenuos Models of Economic Growth - the Case of Albania (281.3 KiB, 2,535 hits)

This paper analyses the impact of development and efficiency of financial sector on economic growth of a group of selected developing countries using a cross-country data averaged over the period 2005-2009. The results show that the impact of financial sector efficiency on economic growth is significantly positive for developing countries. For a sample of 50 developing countries the effect of financial sector development and financial sector efficiency is positive and highly significant. The sensitivity analysis also shows that the relationship remain positive and significant no matter what combination of the omitted variables are used in the basic model. Thus, our findings support the core idea that development and efficiency of financial sector stimulates economic growth.

  Impact of Development and Efficiency of Financial Sector on Economic Growth: Empirical Evidence from Developing Countries (701.6 KiB, 6,188 hits)

The impact of fiscal policy on economic growth is a complex and contradictory topic in finance debates. Government influences real economy through the impact of public revenues and expenditures on the quantity and quality of production factors, labor and capital. High taxation for supporting big public sector can impede growth. On the other hand, some of the public expenditures can stimulate growth. This opposite effects of the public sector’s intervention through fiscal policy rise the debate about the performance of public sector in stimulating economic growth. The aim of this paper is to analyze the differences between developed UE countries and former communist EU countries regarding the public sectors and economic growth

  Correlation Between Government and Economic Growth - Specific Features for 10 Nms (302.7 KiB, 7,481 hits)

This paper discusses the Growth Diagnostics approach developed by Hausmann, Rodrik and Velasco. The approach suggests an analytical framework to identify the most binding constraints that hamper economic growth in a specific country at a specific point in time. Aiming at higher-order principles of neoclassical economics, Growth Diagnostics allows policy- makers to creatively develop policy designs which address the most binding constraint while taking into account relevant factors of their country’s economic, political and social context. Most importantly, it considers both orthodox and heterodox policies as possible solutions to ignite growth. Against the backdrop of changing economic policy advice from the big push idea to the augmented Washington Consensus, the authors analyze the reasoning behind the Growth Diagnostics approach. Criticisms by academics and practitioners serve as a basis for a discussion on the approach’s possible shortcomings. The authors conclude that Growth Diagnostics is a useful tool to inform growth strategies in developing countries, whereas the new framework’s flexibility is discerned as both its essential strength and its main weakness. Among the approach’s most important contributions are its explicit renunciation of economic rules of thumb in favor of fact-based diagnosis and context-specific policy design, its ability to identify reform priorities based on expected impact as well as its caution with respect to potentially adverse second-best interactions between different policy reforms.

  Growth Diagnostics: Strengths and Weaknesses of a Creative Analytical Framework to Identify Economic Growth Constraints in Developing Countries (742.6 KiB, 10,079 hits)