Public debt growth, great recession and fiscal consolidation-the Serbian episode

  • Vladimir Andric Institute of Economic Sciences, Belgrade
  • Jelena Minovic Institute of Economic Sciences (IES), Belgrade


This paper analyses the dynamics of public debt growth in Serbia between the fourth quarter of 2004 (2004Q4) and the same quarter of 2017 (2017Q4). The empirical estimates capture the upward shift in public debt growth from the onset of the Great Recession. The results also show how policy makers have managed to curb the growth of public indebtedness in Serbia between 2014Q4-2017Q4. The government should, however, put greater fiscal efforts to reduce the overall share of public debt in gross domestic product in accordance with the fiscal rules of the Republic of Serbia and the Maastricht convergence criteria.


Author Biographies

Vladimir Andric, Institute of Economic Sciences, Belgrade

I am a Research Assistant at the Department for Multidisciplinary Research, Institute of Economic Sciences, Belgrade.

In my research I apply econometric methodology to answer questions of public interest in the areas of macroeconomics, energy economics and finance.


Jelena Minovic, Institute of Economic Sciences (IES), Belgrade

Senior Research Associate at IES, Belgrade

Scientific and Research Fields:

Quantitative Methods and Models in Finance and Economics

Econometrics & Time Series Analysis

Financial Economics & Financial Markets


Afonso, A., & Jalles, J.T. (2012). Revisiting Fiscal Sustainability-Panel Cointegration and Structural Breaks in OECD Countries. European Central Bank. ECB Working Paper No. 1465.

Andric, V., Arsic, M., & Nojkovic, A. (2016a). Public debt sustainability in Serbia before and during the global financial crisis. Economic Annals, 16(210), 47-78.

Andric, V., Arsic, M., & Nojkovic, A. (2016b). Fiscal Reaction to Interest Payments-the Case of Serbia. Industrija, 44(3), 117-144.

Arsic, M., Nojkovic, A., & Randjelovic, S. (2013). Would Economic Recovery Imply Fiscal Stabilization in Serbia? Serbian Association of Economists Journal, 3-4, 222-237.

Bai, J. (1997). Estimation of a Change Point in Multiple Regression Models. The Review of Economics and Statistics, 79(4), 551-563.

Bai, J., & Perron, P. (1998). Estimating and Testing Linear Models with Multiple Structural Changes. Econometrica, 66(1), 47-78.

Bai, J., & Perron, P. (2003a). Computation and Analysis of Multiple Structural Change Models. Journal of Applied Econometrics, 18(1), 1-22.

Bai, J., & Perron, P. (2003b). Critical values for multiple structural change tests. Econometrics Journal, 6(1), 72-78.

Bakker, B.B., & Christiansen, L.E. (2011). Crisis and Consolidation-Fiscal Challenges in Emerging Europe, in Eller, M., Mooslechner, P. & Ritzberger-Grünwall, D. (Eds.), Limited Fiscal Space in CESEE: Needs and Options for Post-Crisis Reform. Vienna, Austria: Oesterreichische Nationalbank, 25-41.

Berglöf, E., Korniyenko, Y., Plekhanov, A., & Zettelmeyer, J. (2009). Understanding the crisis in emerging Europe. European Bank for Reconstruction and Development. EBRD Working Paper No. 109.

Bohn, H. (2005). The sustainability of fiscal policy in the United States. Ifo Institute-Leibniz Institute for Economic Research at the University of Munich. CESifo working papers No. 1446.

Bornhorst, F., Dobrescu, G., Fedelino, A., Gottschalk, J., & Nakata, T. (2011). When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances. International Monetary Fund. IMF Technical Notes and Manuals 11/02.

Cafiso, G. (2012). A Guide to Public Debt equations. Mimeo, University of Catania. Available at

Cocozza, E., Colabella, A., & Spadafora, F. (2011). The Impact of the Global Crisis on South-Eastern Europe.

International Monetary Fund. IMF Working Paper WP/11/300.

Darvas, Z. (2009). The Impact of the Crisis on Budget Policy in Central and Eastern Europe. Bruegel. Bruegel Working Paper 0904.

Despotovic, D., & Durkalic, D. (2017). Analysis of budget deficit in the candidate countries for EU membership. Serbian Journal of Management, 12(2), 237-253.

Dimova, D., Kongsamut, P., & Vandenbussche, J. (2016). Macroprudential Policies in Southeastern Europe.

International Monetary Fund. IMF Working Paper No. WP/16/29.

Elliott, G., Rothenberg, T.J., & Stock, J.H. (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, 64(4), 813-836.

Hakkio, C.S., & Rush, M. (1991). Is the Budget Deficit “Too Large?” Economic Inquiry, 29(3), 429-445.

Izák, V. (2009). Primary Balance, Public Debt and Fiscal Variables in Postsocialist Members of the European Union. Prague Economic Papers, 18(2), 114-130.

Jawadi, F., & Sousa, R.M. (2013). Structural breaks and nonlinearity in US and UK public debts. Applied Economic Letters, 20(7), 653-657.

Koczan, Z. (2015). Fiscal Deficit and Public Debt in the Western Balkans: 15 Years of Economic Transition. International Monetary Fund. IMF Working Paper No. WP/15/172.

Krajewski, P., Mackiewicz, M., & Szymańska, A. (2016). Fiscal Sustainability in Central and Eastern European Countries-A Post-Crisis Assessment. Prague Economic Papers, 25(2), 175-188.

Lee, J., & Strazicich, M.C. (2003). Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks. The Review of Economics and Statistics, 85(4), 1082-1089.

Lovre, I., Munitlak Ivanović, O., & Mitić, P. (2017). Analysis of public sector efficiency in developed countries. Economic analysis, 50(1/2), 38-49.

Lumsdaine, R.L., & Papell, D.H. (1997). Multiple Trend Breaks and the Unit-Root Hypothesis. The Review of Economics and Statistics, 79(2), 212-218.

Mahadeva, L., & Robinson, P. (2004). Unit Root Testing to Help Model Building. Centre for Central Banking Studies, Bank of England. Handbooks in Central Banking No. 22.

Martins, N.F., & Duarte, A.P. (2017). The Public Finance and the Economic Growth in the First Portuguese Republic. Economic analysis, 47(1-2), 59-75.

Ng, S., & Perron, P. (2001). Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power. Econometrica, 69(6), 1519-1554.

Uctum, M.A., Thurston, T., & Uctum, R. (2006). Public Debt, the Unit Root Hypothesis and Structural Breaks: A Multi-Country Analysis. Economica, 73(289), 129-156.

Vogelsang, T.J., & Perron, P. (1998). Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time. International Economic Review, 39(4), 1073-1100.

Von Hagen, J., & Wolff, G.B. (2006). What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU. Journal of Banking & Finance, 30(12), 3259-3279.

Yildiz, H., & Yildirim, Ç.D. (2014). An empirical study on fiscal sustainability in Eurozone. Serbian Journal of Management, 9(1), 59-70.

Zivot, E., & Andrews, D.W.K. (1992). Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis. Journal of Business & Economic Statistics, 10(3), 251-270.

Original Scientific Paper