Panel Data Analysis of Public and Private Debt and House Price Influence on GDP in the European Union Countries

  • Vytautas Snieška Kaunas University of Technology
  • Daiva Burksaitiene Vilnius Gediminas Technical University
Keywords: panel data analysis, house prices, public debt, private debt, Euro zone, GDP growth

Abstract

The panel data analysis of the influence of change in real public debt, real private debt, and deflated house prices on the GDP in selected European countries is performed. Least squares and autoregressive AR(p) model was used with cross-section and period both fixed by dummy variables. The research has confirmed strong negative influence of public debt with zero, one and two year’s lags as an independent variable on the GDP as the dependent variable. This is not surprising having in mind limited functionality of the European central bank as a lender of the last resort for the countries of the monetary union, that is, for the most of the analysed countries. This finding also confirms the necessity of the transformation of the European Monetary Union to the European Financial Union. Private debt has definite positive influence on the GDP as the dependent variable. It was confirmed by measuring this influence with zero, one and two and three years lags, but this positive influence was 2-3 times lower than the negative influence of public debt on the GDP. House prices unlagged have similar absolute value of positive influence on the GDP coefficient as the absolute value of the negative influence of lagged public debt, according to the regression coefficients received. However, house prices, leading by 2 years, have negative influence on the GDP, but this influence is almost 5 times weaker than the negative influence of unlagged public debt.

DOI: http://dx.doi.org/10.5755/j01.ee.29.2.20000

Author Biographies

Vytautas Snieška, Kaunas University of Technology

Professor of Economics, Business & Management Center

Daiva Burksaitiene, Vilnius Gediminas Technical University
Department of Financial Engineering, Faculty of Business Management
Published
2018-04-23
Section
THE ECONOMIC CONDITIONS OF ENTERPRISE FUNCTIONING