Changes in sovereign debt dynamics in Central and Eastern Europe

The aim of this paper is to shed some light on the degree of sustainability of fiscal debt for a group of Central and Eastern European countries. We apply a battery of time series econometrics methods to show how the financial crisis has affected the debt-to-gross domestic product ratio and how the ratio has behaved recently. The results give us important insights into how governments in Central and Eastern Europe have reacted to the accumulation of debt. We distinguish between two groups of countries: one group where the sovereign debt stock stabilized after the crisis, and another where debt has been accumulated more quickly in recent years. The results provide important policy lessons for the authorities responsible.