KEY MACROECONOMIC DETERMINANTS OF GOVERNMENT DEBT - THE CASE OF NORTH MACEDONIA
KEY MACROECONOMIC DETERMINANTS OF GOVERNMENT DEBT - THE CASE OF NORTH MACEDONIA

Summary/Abstract: Government debt, as an important macroeconomic determinant, has a significant impact on the design of fiscal and monetary policy in a country. Namely, with the emergence of the Corona crisis and the energy crisis which caused: 1) disruption of global supply chains, 2) increase in food and energy prices and 3) disruption of the balance of supply and demand, a large number of countries including The Republic of North Macedonia started to create targeted anti-crisis measures that caused the growth of the budget deficit, and as a result, the growth of the government debt. What is characteristic about North Macedonia is that the growth of the government debt caused the growth of the public debt, whereby it exceeded 60% of the GDP, which also means violation of one of the Maastricht criteria for convergence. The focus of this paper will be the determination of the effect of the key macroeconomic determinants on the government debt of the Republic of North Macedonia. This research paper uses secondary data from relevant sources such as the Ministry of Finance and the National Bank of North Macedonia, the State Statistics Office and the IMF. In the empirical part of the research, the multiple linear regression model was applied, which incorporates five variables. In the model, government debt as a percentage of GDP is the dependent variable, and the annual economic growth, the average annual inflation rate, the budget deficit (expressed as a percentage of GDP) and the annual amount of FDI (expressed as a percentage of GDP) are independent variables. Based on the results of the research, it can be concluded that the world crises have a strong impact on the public finances of North Macedonia, and the growth of the budget deficit largely causes the growth of the country's government debt.

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