A growing number of recent works support the idea of debt threshold level (turning point), above which debt starts reducing economic growth. However, estimated threshold varies sharply across studies and gives a little insight into what the optimal level of debt is. The point is that there is no single turning point that could be applied to all countries and a proper investigation is needed on factors, which shape the debt impact on growth. This study aims to investigate whether debt threshold level depends on government effectiveness (one of the aspects of countries’ institutional quality) and trade balance. Our SYS-GMM estimates (and alternatively OLS and LSDV for robustness check) are based on the unbalanced panel of 152 countries over the period of 1996–2016 and on two strategies: (i) splitting of sample into subsamples according to trade balance and government effectiveness and (ii) including debt and government effectiveness, debt and trade deficit interactions. The obtained results are in line with those which confirm inverted U-shaped debt-growth relationship with clear debt turning point dependence on government effectiveness. However, effective governance is not enough to avoid the negative debt effect. Trade balance seems to be more crucial factor than institutional quality, on which threshold level depends.

The impact of economic fluctuations on the total unemployment rate is widely studied, however, with respect to age- and gender-specific unemployment, this relationship is not so well examined. We apply the gap version of Okun’s law, aiming to estimate youth unemployment rate sensitivity to output deviations from its potential level. Additionally, we aim to compare whether men or women have a higher equilibrium unemployment rate when output is at the potential level. Contrary to most studies on age- and gender-specific Okun’s coefficients, which assume that the effect of output on unemployment is homogenous, we allow a different effect to occur, depending on the output gap’s sign (positive/negative). The focus of the analysis is on 28 EU countries over the period of 2000–2018. The model is estimated by least squares dummy variable estimator (LSDV), using Prais–Winsten standard errors. We did not find evidence that higher equilibrium unemployment rates are more typical for men or for women. The estimates clearly show the equilibrium level of youth unemployment to be well above that of total unemployment, and this conclusion holds for both genders. We assess greater youth unemployment sensitivity to negative output shock, rather than to positive output shock, but when we take confidence intervals into consideration, this conclusion becomes less obvious.

The impact of economic growth on unemployment is commonly agreed and extensively studied. However, how age and gender shape this relationship is not as well explored, while there is an absence of research on whether education plays a role. We apply Okun’s law, aiming to estimate age-, gender- and educational attainment level-specific unemployment rate sensitivity to cyclical output fluctuations. Since the empirical literature provides evidence in favour of the non-linear impact of output change on the unemployment rate, supporting higher effects of recessions than that of expansions, we aim to enrich this analysis by estimating how the impact of positive/negative output change on the specific unemployment rate varies with the level of the total unemployment. The analysis is based on 28 European Union (EU) countries and covers the period of 1995–2019. The equations are estimated by least-squares dummy variables (LSDV), using Prais–Winsten standard errors. For the robustness check, we alternatively used Newey–West standard errors to address serial-correlations and heteroscedasticity, and the Arellano–Bond estimator for some specifications that assume dynamics in the panel. The results support previous findings of male- and youth-specific Okun’s coefficients and reveal that they significantly stand out just over the periods of negative output change. Additionally, we find that educational attainment level is an important factor explaining the heterogeneity of unemployment reaction to output change.

Currently countries are facing a new crisis caused by the COVID-19, which leads to the rise of government expenditures and additional borrowing. This situation highlights the importance of examine factors which determine the level of public debt that still sustains economic growth. A growing body of research supports the idea of a non-linear debt–growth relationship and estimates the threshold level above which debt becomes unsustainable and has a negative effect on output. The empirical evidence points out that there is no single sustainable debt threshold level that holds for all countries. This research complements scarce empirical evidence on the heterogeneous debt–growth relationship and provides some insights on the publicly available statistical indicators that might signal a relatively low/high expenditure multiplier and, at the same time, potentially unsustainable/sustainable growth stimulus through the use of borrowed funds. We test the hypothesis that the expenditure multiplier is shaping the impact of public debt on growth. Our empirical examination is based on panel data analysis in the groups of countries with expected relatively high and low expenditure multiplier. Research results show that a statistically significant negative marginal effect of debt on growth starts to manifest at a lower debt-to-GDP ratio when the expenditure multiplier is lower and vice-versa. The study shed some light on the sources of heterogeneity in a debt–growth relationship. We can conclude that countries with a high expenditure multiplier level can borrow more and sustain growth. In contrast, in countries with a lower expenditure multiplier, a relatively low debt level becomes unsustainable for growth.

This paper contributes to the limited literature on the factors conditioning the turning point of the public debt–growth relationship. A decade after the global financial crisis, when the debt ratio in many countries was still above pre-crisis levels, the COVID-19 pandemic again increased the pressure on public finances. It revived the debate on the ability to promote economic recovery through debt-financed government expenditure. However, more intense government borrowing increases its costs and uncertainty about future taxation policy, thus potentially disturbing private consumption, investment, and economic growth. In this paper, we estimate the thresholds of indicators on which the expenditure multiplier depends, which may already imply a risk that public debt will dampen economic growth. We use a methodology of structural threshold regression to examine the varying effects that debt might have on growth using consumption, investment, taxes, and imports as threshold variables, as well as several other factors suggested by previous contributions. The applied methodology allows for the addressing of parameter heterogeneity and endogeneity to be accounted for at the same time. The main results suggest that a positive debt effect is more likely if the conditions for a high expenditure multiplier are met, that an increase in the public-debt-to-GDP ratio is not necessarily deleterious to growth if shares of private consumption and investment in GDP are high, while the tax-revenue-to-GDP ratio is low.

The literature on social capital stresses the relations between social capital (trust, social norms and networks), government effectiveness and economic performance. In empirical investigations the relationship between aforementioned items was clarified by using various indicators of social capital and different country samples. Due to this reason the results are hardly comparable. In this article we aim to examine the strength of the relationship between social capital, governance quality and economic performance by using the same indicators of social capital and the same country sample (23 European countries). The study has indicated that both social capital and government indicators are related to economic performance and to each other. Results showed the positive correlation of two social capital dimensions, namely trust and networks, with economic performance indicators and governance indicators, while civism dimensions do not correlate either with economic performance or with governance indicators. In this paper we used three economic performance indicators, namely GDP per capita in Purchasing Power Standards, labour productivity per person employed and percentage of gross domestic expenditure on R&D (GERD) financed by industry. The literature on social capital stresses the relations between social capital (trust, social norms and networks), government effectiveness and economic performance. In empirical investigations the relationship between aforementioned items was clarified by using various indicators of social capital and different country samples. Due to this reason the results are hardly comparable. In this article we aim to examine the strength of the relationship between social capital, governance quality and economic performance by using the same indicators of social capital and the same country sample (23 European countries). The study has indicated that both social capital and government indicators are related to economic performance and to each other. Results showed the positive correlation of two social capital dimensions, namely trust and networks, with economic performance indicators and governance indicators, while civism dimensions do not correlate either with economic performance or with governance indicators. In this paper we used three economic performance indicators, namely GDP per capita in Purchasing Power Standards, labour productivity per person employed and percentage of gross domestic expenditure on R&D (GERD) financed by industry.