Macroeconomic Divergence under Wartime Shocks: Inflation and Public Debt Dynamics in Eastern EU and Balkan Economies
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Ilham HUSEYNLI Department of Mathematics and Statistics Azerbaijan State University of Economics (UNEC), Baku, Azerbaijan
The Russia–Ukraine war has produced significant macroeconomic shocks across Europe, yet these have been absorbed unevenly across sub-regions with differing institutional arrangements. Existing scholarship has examined inflation and public debt largely in isolation, with limited comparative analysis of how Eastern EU member states and non-EU Balkan states have responded to this asymmetric shock. This study measures and compares the war's association with inflation and public debt across the two regional groups and identifies the structural factors related to their divergent resilience. A longitudinal comparative design covering 2018–2023 was adopted, drawing on data from Eurostat, the International Monetary Fund, and the World Bank. The analytical framework combined descriptive statistics, fixed-effects panel regression with country-clustered standard errors, and structural-break (Chow) tests applied at a harmonised monthly frequency obtained through linear interpolation of lower-frequency fiscal series.
Eastern EU states experienced a more severe inflationary shock, with average HICP reaching 14.7% in 2022 against 11.3% in the Balkans; the energy-mix composition, proxied by the share of carbon-intensive imports and historical exposure to Russian energy supplies rather than headline import dependency, emerged as the strongest correlate (β = 0.182, p < 0.001). Balkan states, by contrast, faced greater fiscal stress, with public debt rising to 81.7% of GDP by 2023 against 56.1% in the Eastern EU; exchange-rate volatility was strongly associated with this divergence (β = 9.11, p = 0.006). Structural-break tests confirmed February 2022 as a statistically significant turning point for both inflation (F = 18.72, p < 0.001) and public debt (F = 9.43, p = 0.003). EU integration appears to constrain debt accumulation but offers limited protection against inflationary pressures. To the authors' knowledge, this study provides one of the first quantitative comparative assessments of wartime inflation–debt dynamics between Eastern EU and Balkan states.
Copyright© 2026 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.
Article’s History: Received 15th of March, 2026; Revised 9th of April, 2026; Accepted 12th of May, 2026; Available online: 30th of June, 2026. Published as research article in the Volume XXI, Summer, Issue 3(93), June 2026.
Gasimov, J., Babayev, F., Huseynli, I., & Khudaverdili, U. (2026). Macroeconomic Divergence under Wartime Shocks: Inflation and Public Debt Dynamics in Eastern EU and Balkan Economies. Journal of Applied Economic Sciences, Volume XXI, Summer, 3(93), 719 – 750. https://doi.org/10.57017/jaes.v21.3(93).03
Acknowledgements: The authors gratefully acknowledge the constructive comments provided by colleagues at Nakhchivan State University, Baku State University, Azerbaijan State University of Economics (UNEC), and Western Caspian University during the preparation of this manuscript. The authors also thank Eurostat, the International Monetary Fund, the European Central Bank, and the World Bank for maintaining the open-access macroeconomic datasets used in this study. Any remaining errors are the sole responsibility of the authors.
Funding: This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.
Conflict of Interest: The authors declare no conflict of interest. The views and conclusions expressed in this study are solely those of the authors and do not necessarily reflect the positions of their affiliated institutions.
Use of Artificial Intelligence: During the preparation of this work, the authors used Claude (Anthropic) for language refinement and Grammarly for grammar and style checking of the English text. After using these tools, the authors reviewed and edited the content as needed and take full responsibility for the content of this publication. No AI tools were used to generate research ideas, design the methodology, analyse data, or draw conclusions. All figures retained in this version are exclusively data-driven visualisations produced through standard statistical software (Python's matplotlib and seaborn libraries) using the authors' compiled dataset from Eurostat, the International Monetary Fund, and the World Bank.
Data Availability Statement: The data supporting the findings of this study are publicly available from the following sources: Eurostat: https://ec.europa.eu/eurostat; International Monetary Fund (World Economic Outlook and Government Finance Statistics): https://www.imf.org/en/Data; World Bank (World Development Indicators): https://databank.worldbank.org/source/world-development-indicators; European Central Bank Data Portal: https://data.ecb.europa.eu. The harmonised datasets used for the panel regressions, structural break tests, and correlation analyses, including the monthly panel database and frequency-harmonisation procedures, are available from the corresponding author upon reasonable request.
Ethical Approval Statement: This study is based exclusively on secondary, publicly available macroeconomic data and does not involve human participants, animal subjects, personal data, or confidential information. Consequently, ethical approval from an institutional review board or ethics committee was not required.
All data were obtained from authoritative international sources, including Eurostat, the International Monetary Fund (IMF), and the World Bank, and were used in accordance with their respective terms of use. To ensure data integrity and reliability, the authors applied consistent variable definitions and cross-validated data across sources when discrepancies arose. The exclusive use of publicly accessible databases ensures transparency and facilitates the replication of results. Documentation of data collection, harmonisation, interpolation, and analytical procedures is available from the corresponding author upon reasonable request.
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