TITLE:
Competitiveness and Public Debts in Times of Crisis
AUTHORS:
Thomas Poufinas, George Galanos, Pyrros Papadimitriou
KEYWORDS:
Competitiveness, Crisis, Euro-Zone Public Debt, Structure of the External Balance of Payments
JOURNAL NAME:
Modern Economy,
Vol.9 No.9,
September
3,
2018
ABSTRACT: It is observed that countries, possibly more than
ever, try to remain or become (more) competitive. This has been felt especially
during the recent economic crisis, when countries facing a high debt or deficit
attempted to find solutions to overcome it. In most cases the first measures
attempted to confront debt or deficit, whatever the problem was.
Competitiveness and growth have been discussed but always came second.
Sometimes, they were not even considered early enough, although they are of
equal or even higher importance. We believe that a country should remain
competitive at all times, especially at times of crisis, as it can help it
contain its debt (public and private). We even trust that countries that
maintain their competitiveness are more capable in weathering adverse economic
environments. The purpose of this article is to prove, using an econometric
model, the existence of a relationship between the external competitiveness of
an economy and its public and private sector deficits, as measured by the
relevant debt levels. We indeed find evidence that public and private debt is definitely linked to the country
competitiveness as measured by GDP growth, GDP per capita, ease of doing
business, tax rate, pensions and unemployment. This
can be of use to institutions and policy makers when they want to decide how
they will secure that their country is and remains competitive, especially in
times of crisis.