Does Public Debt Crowd Out Public Investment in Central and Eastern European economies? A Dynamic Approach Using CS-ARDL

This study estimates the impact of public debt on public investment in Central and Eastern European (CEE) economies. We implement Cross-sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) model, which effectively handles cross-sectional dependence and slope heterogeneity, while dealing with short- and long-run coefficients simultaneously. The results indicate the existence of both short- and long-term crowding out effects of public debt on public investment in the CEE region. These findings have significant fiscal policy repercussions, particularly in context marked by constrained financial resources and substantial debt loads, as has been the case in a number of CEE economies.