PUBLIC DEBT-UNEMPLOYMENT NEXUS IN SOUTHEAST EUROPE COUNTRIES

Abstract

The examination of the relationship between public debt and unemployment is of crucial importance for understanding macroeconomic dynamics and for designing sustainable economic policies. In recent decades, the countries of Southeast Europe (SEE) have faced a dual challenge: persistently high unemployment rates and rising levels of public debt. This paper analyzes the causal relationship between public debt and unemployment in SEE countries over the period 2004–2023, employing correlation and panel regression analysis. The study utilizes annual data spanning 20 years and covering eight SEE countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, North Macedonia, Romania, and Serbia). Empirical findings indicate a significant positive association between the growth of public debt and unemployment, particularly in the aftermath of the global financial crisis. The results underscore the need for careful fiscal policy balancing in order to mitigate the adverse effects of high indebtedness on labor markets in developing economies.