HOW DOES PUBLIC DEBT AFFECT ECONOMIC GROWTH IN ALBANIA?

The global recession and the sovereign debt of European countries has triggered an intense debate over the effectiveness of fiscal policy and over the consequences of rising public debt. The purpose of this paper is to determine if there exist a correlation between the public debt and the economic growth in Albania, where the economic growth will be considered as the increase of GDP. The results and the methodologies are different in different countries and periods, as represented by various empirical studies. What is the situation in Albania at about the last 25 years? The SVAR methodology is used for analyzing this relationship. The results indicated that an instantaneous increase in real economic growth might increase the public debt and vice versa.