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Emerging economies’ short-term private external debt as evidence of economic crisis


  • Ekici, Oya
  • Nemlioğlu, Karun


Considering both economic stability and crises, the need to analyze the short-term private external debt (ST-PrED) of a country is notably obvious for proactive crisis management. In the economics literature, the convention is to monitor the ratio of debt to the country’s Central Bank’s international reserves. However, the debt itself could act as a main precursor. In this context, we examine Turkey’s ST-PrED data as representative of an emerging economy. Our methodology is to use a linear growth model to fit the ST-PrED data and a Bayesian method for model estimation and forecasting strategy. The empirical findings illustrate the performance of our predictions in capturing unstable terms of the economy. As a policy implication, we recommend that policy makers place special emphasis on ST-PrED as a potent indicator of the country’s financial vulnerability. Taking into account the ST-PrED level, to prevent the contagion effect of a crisis, it is essential to implement policies that are more effective in coordinating international financial flows and improving liquidity positions. Furthermore, fostering structural reform and an innovative approach to strengthen the real sector and improve education could create economic stability and sustainability in terms of debt structure among emerging economies.

Suggested Citation

  • Ekici, Oya & Nemlioğlu, Karun, 2017. "Emerging economies’ short-term private external debt as evidence of economic crisis," Journal of Policy Modeling, Elsevier, vol. 39(2), pages 232-246.
  • Handle: RePEc:eee:jpolmo:v:39:y:2017:i:2:p:232-246
    DOI: 10.1016/j.jpolmod.2017.01.002

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    References listed on IDEAS

    1. Harvey, Andrew C. & Trimbur, Thomas M. & Van Dijk, Herman K., 2007. "Trends and cycles in economic time series: A Bayesian approach," Journal of Econometrics, Elsevier, vol. 140(2), pages 618-649, October.
    2. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2010. "Financial Stability, the Trilemma, and International Reserves," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 57-94, April.
    3. ., 2013. "The ABCs of the World Bank," Chapters, in: Change and Continuity at the World Bank, chapter 2, pages 7-21, Edward Elgar Publishing.
    4. Hughes Hallett, Andrew & Martinez Oliva, Juan Carlos, 2015. "The importance of trade and capital imbalances in the European debt crisis," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 229-252.
    5. ., 2013. "The World Bank and Wolfensohn era reforms," Chapters, in: Change and Continuity at the World Bank, chapter 1, pages 1-6, Edward Elgar Publishing.
    6. Della Posta, Pompeo, 2016. "Currency and external debt crises: A unifying framework," Journal of Policy Modeling, Elsevier, vol. 38(4), pages 723-736.
    7. Petris, Giovanni, 2010. "An R Package for Dynamic Linear Models," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 36(i12).
    8. Erbil, Can & Salman, Ferhan, 2006. "Revealing Turkey's public debt burden: A transparent payments approach," Journal of Policy Modeling, Elsevier, vol. 28(7), pages 825-835, October.
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    Cited by:

    1. Samira Hellou, 2018. "Term structure of bank flows to emerging countries: what effects of short- vs. long-term regulatory arbitrage are?," EconomiX Working Papers 2018-23, University of Paris Nanterre, EconomiX.

    More about this item


    Short term private external debt; Economic crisis; Linear growth model; Bayesian estimation and forecasting; Debt indicators;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt


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