The Causality Analysis of External Debt Service and GNP : The Case of Turkey
It is argued that debt service burden has a negative impact on investment and capital accumulation. The main reason is that the greater percentage of reserves (foreign currency) goes to meet debt service and there will be a reduction in external capital because of a decrease in creditworthiness. This paper extends the model of Cunningham (1992) and uses multivariate cointegration techniques to develop a vector error correction model useful for investigating the long-run effects of external debt service on GNP level. Moreover, the information on cointegration (Johansen ,1988 and Johansen &Juselius ,1990) in variables are taken into consideration in specifying the correct model. We apply our methodology to Turkey and show how external debt service is having a negative short -run impact on economic growth. The results also show that there is a uni-directional causal relationship between debt service and GNP level.
Volume (Year): 2 (2002)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara|
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Web page: http://www.tcmb.gov.tr/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christos Kollias, 1995. "Preliminary findings on the economic effects of Greek military expenditure," Applied Economics Letters, Taylor & Francis Journals, vol. 2(1), pages 16-18.
- Merih Celâsun & Dani Rodrik, 1989. "Turkish Experience with Debt: Macroeconomic Policy and Performance," NBER Chapters,in: Developing Country Debt and the World Economy, pages 193-211 National Bureau of Economic Research, Inc.
- Metwally, M. M. & Tamaschke, Rick, 1994. "The interaction among foreign debt, capital flows, and growth: Case studies," Journal of Policy Modeling, Elsevier, vol. 16(6), pages 597-608, December.
- van den Berg, Hendrik & Jayanetti, Sanath C., 1993. "A novel test of the monetary approach using black market exchange rates and the Johansen-Juselius cointegration method," Economics Letters, Elsevier, vol. 41(4), pages 413-418.
- Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-372, January.
- Riccardo Faini & Jaime de Melo, 2015.
"Adjustment, Investment and the Real Exchange Rate in Developing Countries,"
World Scientific Book Chapters,in: Developing Countries in the World Economy, chapter 6, pages 137-165
World Scientific Publishing Co. Pte. Ltd..
- Faini, Riccardo & de Melo, Jaime, 1990. "Adjustment, investment, and the real exchange rate in developing countries," Policy Research Working Paper Series 473, The World Bank.
- Bert Hofman & Helmut Reisen, 1991. "Some evidence on debt-related determinants of investment and consumption in heavily indebted countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(2), pages 281-299, June.
- Selami Sezgin, 1997. "Country survey X: Defence spending in Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 8(4), pages 381-409.
- Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
- Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
- Roger Perman, 1991. "Cointegration: An Introduction to the Literature," Journal of Economic Studies, Emerald Group Publishing, vol. 18(3), pages 3-30, September.
- Daniel Levy, 2005. "Capital Stock Depreciation, Tax Rules, and Composition of Aggregate Investment," Others 0505007, EconWPA.
- Hall, S G, 1989. "Maximum Likelihood Estimation of Cointegration Vectors: An Example of the Johansen Procedure," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(2), pages 213-218, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Krueger, Anne O., 1987. "Origins of the developing countries' debt crisis : 1970 to 1982," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 165-187, October.
- Khalifa Ghali, 1998. "Public investment and private capital formation in a vector error-correction model of growth," Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 837-844.
- Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Steven B. Kamin & Robert B. Kahn & Ross Levine, 1989. "External debt and developing country growth," International Finance Discussion Papers 352, Board of Governors of the Federal Reserve System (U.S.).
- Ghatak, Subrata & Milner, Chris & Utkulu, Utku, 1995. "Trade Liberalisation and Endogenous Growth: Some Evidence for Turkey," Economic Change and Restructuring, Springer, vol. 28(2-3), pages 147-167.
- Borensztein, Eduardo, 1990. "Debt overhang, credit rationing and investment," Journal of Development Economics, Elsevier, vol. 32(2), pages 315-335, April. Full references (including those not matched with items on IDEAS)