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Growth-maximizing public debt in Turkey: An empirical investigation

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  • Bulus Gokay Canberk

    (Aksaray University, Faculty of Economics and Administrative Sciences, Department of Economics, 68100Aksaray, Turkey)

Abstract

The aim of the paper is to empirically estimate the growth-maximizing debt-to-GDP ratio in the case of Turkey. To calculate the growth-maximizing debt-to-GDP ratio FMOLS, DOLS, and CCR estimators are used for the period from 1960–2013. According to the empirical findings the growth-maximizing debt-to-GDP ratio varies between 34.3% and 38.7%. Based on a comparison of these ratios to current data (29.1% for 2018), Turkey has the capacity for additional borrowing to achieve a growth-maximizing debt-to-GDP ratio. If this additional borrowing capacity is used for public investment with a return greater than the interest cost of the additional debt economic growth will be maximized and public debt sustainability supported.

Suggested Citation

  • Bulus Gokay Canberk, 2020. "Growth-maximizing public debt in Turkey: An empirical investigation," Economics and Business Review, Sciendo, vol. 6(3), pages 68-87, August.
    • Handle: RePEc:vrs:ecobur:v:6:y:2020:i:3:p:68-87:n:4
    DOI: 10.18559/ebr.2020.3.4
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    References listed on IDEAS

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    More about this item

    Keywords

    public debt; economic growth; fiscal rule; Turkish economy;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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