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INTRODUCTION
Theglobalfinancialcrisisof200;+andthesubsequentbankrescuingpack-
agesandfinancialrestructuringprogramsresultedintherapidgrowthofpublic
debt,particularlyinEuropeaneconomies.Withpriorityplacedonachieving
financialstability,decreasingfinancialriskandsafeguardingcreditavailability,
balancedpublicbudgetsbecameasecondaryobjective.12yearsafterthefinancial
crisis,publicindebtednessfurtherexpandedwiththeoutbreakoftheCOVID-19
pandemic,thistimewithpublicspendingcenteredontherealeconomy.
Asaresult,therelationshipbetweenfinancialstability,fiscalsustainabilityand
economicgrowth,accompaniedbyefficientaccesstocredit,becameakeypublic
policyissue.
Financialstabilityisadifficultconcepttodefine.Itrequiresagreatdeal:aneffi-
cient,well-performingfinancialsystemandhealthyinstitutionsandmarkets,func-
tioninginaninfrastructurethatisresilienttoadversedisturbances.Thecomplex
processesofexpanding,liberalisingandglobalisingfinancialflowsinthepasthave
producedawideninggapbetweenthegrowthratesofthefinancialeconomyandthe
realone.Therapidexpansionofthefinancialsectorhasnegativelyaffectedfinan-
cialstability,byfosteringspeculativebubblesandexcessiverisk-taking,particularly
before200;(Allen,Babus&Carletti2009,Criste&Lupu2014).Inefficienciesin
thereallocationofcapitalmayalsolaythefoundationsforfuturevulnerabilities
(ECB2005).Theimpactofpublicdebtonmacroeconomicvariables,particularly
GDPgrowth,hasbeenextensivelyresearchedintheliterature,thoughresultshave
notbeenconclusive.Basedonamulti-countryhistoricaldataset,Reinhartand
Rogoff(2010,2011)assertedthatthereisasystemicrelationshipbetweenhigh
publicdebtlevels,growthandinflation,particularlyforcountrieswithpublicdebt
over90%ofGDP.Theirconclusionsmetwithcriticism,particularlyasthe90%
thresholdsintherelationbetweenpublicdebtandeconomicgrowthlackrobust-
ness.Thatiswhyanynewstudiesontheconsequencesofhighpublicdebtare
importantforbothacademicdebateandforpublicpolicyconsiderations.
Withtheabovearguments,thismonographinvestigatesthelinkagesbetween
thereal,financialandpublicsectors.Thepurposeistoidentifythecomponents
andtoanalysetheinterconnectionsbetweenfinancialstability,publicdebtand