Relationship between Economic Growth External Debt: Application to Turkey

Abstract

In this study, the effects of foreign debt on economic growth in Turkey’s economy are investigated with contemporary time-series techniques for 1970-2016 periods. In the study, the stationarity of the series is examined by ADF and PP unit root tests and the series were found to be stationary at different levels. The existence of cointegration relationship between the series is examined by the Bounds Testing method and it is determined that external debt and economic growth move together in the long run. In the long-run analysis carried out by ARDL method, it is found that 1% increase in fixed capital stock, labor force, external debt stock and human capital enhance national income by 0.31, 0.27, 0.13 and 0.46%, respectively. Error correction mechanism of the model operates, that is, the outcomes are reliable. Causality relationships between the series are examined by TodaYamamoto causality test and it is found that one-way causality relationships exist from labor and external debt to economic growth. Also in this test; one-way causality relationships are found from the labor force to the fixed capital stock and human capital and from the external debt stock to the human capital.

Keywords

• External Debt
• Economic Growth
• Bounds Testing
• ARDL

Dış Borç Ekonomik Büyüme İlişkisi: Türkiye Uygulaması

Abstract

Bu çalışmada, Türkiye ekonomisinde dış borçların ekonomik büyüme üzerindeki etkileri 1970-2016 dönemi için güncel zaman serisi teknikleriyle araştırılmıştır. Çalışmada serilerin durağanlığı ADF ve PP birim kök testleriyle incelenmiş ve serilerin farklı derecelerde durağan oldukları görülmüştür. Seriler arasında eşbütünleşme ilişkisinin varlığı Sınır Testi yöntemiyle incelenmiş ve dış borçlanma ile ekonomik büyümenin uzun dönemde birlikte hareket ettikleri belirlenmiştir. ARDL yöntemiyle gerçekleştirilen uzun dönem analizinde Türkiye’de milli geliri; sabit sermaye stokundaki %1’lik artışın ortalama %0.31, işgücündeki %1 oranındaki artışın %0.27, dış borç stokundaki %1’lik artışın %0.13 ve beşeri sermayedeki %1 oranındaki artışın %0.46 oranında artırdığı tespit edilmiştir. Modelin hata düzeltme mekanizması çalışmaktadır ve elde edilen bulgular güvenilirdir. Seriler arasındaki nedensellik ilişkileri TodaYamamoto nedensellik testiyle incelenmiş ve işgücü ve dış borçlardan ekonomik büyümeye doğru tek yönlü nedensellik ilişkilerinin var olduğu tespit edilmiştir. Bu testte ayrıca; işgücünden sabit sermaye stoku ve beşeri sermayeye ve dış borç stokundan beşeri sermayeye doğru da tek yönlü nedensellik ilişkileri bulunmuştur.

Keywords

• Dış Borçlanma
• Ekonomik Büyüme
• Sınır Testi
• ARDL

References

1. Adegbite, E. O., Ayadi, F. S., & Ayadi, O. F. (2008). The Impact of Nigeria’s External Debt on Economic Development. International Journal of Emerging Markets, 3(3), 285-301.
2. Agir, H. (2016). The Causality Analysis of The Relationship between External Borrowing and Economic Growth in Turkey. Selcuk University Journal of Social and Economic Research, 32, 204-221.
3. Akan, Y., & Kanca, O. C. (2015), The Relationship between External Debt, Economic Growth and Inflation in Turkey: VAR Approach (1980-2013). Hacettepe University, Journal of Faculty of Economics and Administrative Sciences, 33(3), 1-22.
4. Altin, S. (2003), Evaluating Foreign Sources in Terms of Turkey's Ecommic Development. Süleyman Demirel University Institute of Social Sciences, Isparta.
5. Aysu, Y. (2011). The Foreign Debt Problem of Turkey after 1980 and Its Impact on Economic Growth. Adnan Menderes University, Institute of Social Sciences, Aydin.
6. Bilginoglu, M.A., & Aysu, A. (2008), The Effects of External Debts on Economic Growth: The Case of Turkey. Journal of Erciyes University Faculty of Economics and Administrative Sciences, 31, 1-23.
7. Boopen, S., Kesseven, P., & Ramesh, D. (2007), External Debt and Economic Growth: A Vector Error Correction Approach. International Journal of Business Research, 7(5), 75-91.
8. Brueckner, M., & Lederman, D. (2017). Inequality and GDP per capita: The Role of Initial Income. http://pubdocs.worldbank.org/en/755201504498011731/inequality-and-growth-3-september-2017.pdf, (Accessed: 14 Jan. 2018).

9. Ceylan, S., & Durkaya, M. (2011). The Relation between External Debt and Economic Growth: An Asymmetric Co-integration Analysis. Journal of Economics Business and Finance (İktisat İşletme ve Finans), 26(301), 91-115.
10. Cunningham, R.T. (1993). The Effects of Debt Burden on Economic Growth in Heavily Indebted Nations. Journal of Economic Development, 18(1), 115-126.
11. Cogurucu, I., & Coban, O. (2011). The Relationship between External Debt and Economic Growth: The Case of Turkey (1980-2009). Karamanoglu Mehmetbey University Journal of Social and Economic Research, 13(21), 133-149.
12. Daud, S.N.M., Ahmad, A.H., & Azman-Saini, W.N.W. (2013). Does External Debt Contribute to Malaysia Economic Growth?. Ekonomska Istražıvanja-Economic Research, 26(2), 51-68.
13. Davidescu, A.A. (2015). Bounds Test Approach for the Long Run Relationship between Shadow Economy and Official Economy: An Empirical Analysis for Romania. Journal of Applied Quantitive Methods, 10(1), 36-47.
14. Dickey, D.A., & Fuller, W.A. (1981). Distribution of the Estimators for Autoregressive Time Series with A Unit Root. Econometrica, 49, 1057-1072.
15. Dritsaki, C. (2013). Causal Nexus between Economic Growth, Exports and Government Debt: The case of Greece. Procedia Economics and Finance, 5, 251-259. World Bank. (2018). What is External Debt? https://datahelpdesk.worldbank.org /knowledgebase/articles/474124-what-is-external-debt, (Accessed: 03.01.2018).
16. Elmas Arslan, G. (2013). Economic Growth, Development and Income Distribution. Hitit University Journal of Social Sciences Institute, 6(2), 45-52.
17. Engle, R.F., & Granger, C.W. J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55(2), 251-276.
18. Eratas, F., & Basci Nur, H. (2013). The Relationship between External Debt and Economic Growth: The Example of “Emerging Markets Economies. Marmara University Journal of Economics and Administrative Sciences, XXXV(II), 207-230.
19. Erdogan, S., & Canbay, S. (2016). A Theoretical Investigation about the Relationship of Economic Growth and Research & Development (R&D) Expenditure. Journal of Social Sciences of Mus Alparslan University, 4(2), 29-44.
20. Evgin, T. (2000). Our Foreign Debts From Past to Present (Dünden Bugüne Dış Borçlarımız). General Directorate of Economic Research, Research Review Series, N. 26, Ankara.
21. Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37, 424-438.
22. Gujarati, D.N., & Porter, D.C. (2012), Basic Econometrics. Literatur Publications, Istanbul.
23. Gul, E., Kamaci, A., & Konya, S. (2012). Effect of External Debt on Growth: The Case of Central Asian Republics and Turkey. International Conference on Eurasian Economies, 11-13 October, Almaty – Kazakhstan.
24. Gurdal, T., & Yavuz, H. (2015). The Relationship of External Borrowing and Economic Growth in Turkey: The Period of 1990-2013. Journal of Finance (Maliye Dergisi), 168, 154 - 169.
25. Guvel, E. A. (2011). Economic Growth Theories. Dynamics of the Wealth of Nations (Ekonomik Büyüme Kuramları. Ulusların Zenginliklerinin Dinamikleri). Karahan Bookstore, Adana.
26. Jilenga, M. T., Xu, H., & Gondje-Dacka, I. M. (2016). The Impact of External Debt and Foreign Direct Investment on Economic Growth: Empirical Evidence from Tanzania. International Journal of Financial Research, 7(2), 154-162.
27. Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamic and Control, (12), 231-254.
28. Jones, C.I. (2007). Introduction to Economic Growth. Literatur Publications, Istanbul.
29. Jones, C. J. (2016). The Facts of Economic Growth. Handbook of Macroeconomics, Volume 2A. Elsevier. https://web.stanford.edu/~chadj/facts.pdf, (Accessed: 13 Jan. 2018).
30. Kamacı, A. (2016). Effects of External Debt on Economic Growth and Inflation: Panel Cointegration and Panel Causality Analyses. International Journal of Cultural and Social Studies (IntJCSS), 2(1), 165-175.
31. Kara, M. (2001). External Debt Dilemma in Turkey's Economic Growth Process. Süleyman Demirel University, Faculty of Economics and Administrative Sciences, 6(1), 95-110.
32. Karagol, M. (2014). Redefining the Production Factors in the Development Process (Kalkınma Sürecinde Üretim Faktörlerinin Yeniden Tanımlanması). Journal of Leges Economic and Legal Studies, 1(1), 1-11.
33. Kesbic, C.Y., Dundar, Ö., & Devrim, A. (2016). Crowding Out Effect of Public Investments on Private Sector Investments: The Turkey Example. Dokuz Eylül University, Journal of Faculty of Economics and Administrative Sciences, 31(2), 59-94.
34. Kozali, J. (2007). External Debt Problem and the Impact of External Debt on The Growth: Turkish Experience. Dokuz Eylul University Institute of Social Sciences, Izmir.
35. Kutlu, S., & Yurttaguler, I.M. (2016). External Debt-Economic Growth Relationship in Turkey: A Causality Analysis for the 1998-2014 Period. Marmara University Journal of Economics and Administrative Sciences, 38(1), 229-248.
36. Lim, C., & McAleer, M. (2001). Cointegration Analysis of Quarterly Tourism Demand by Hong Kong and Singapore for Australia. Applied Economics, 33, 1599-1619.
37. Lin, S., & Sosin, K. (2001), Foreign Debt and Economic Growth. Economics of Transition, 9(3), 635-655.
38. Nwannebuike, U.S., Ike, U. J., & Onuka, O.I. (2016). External Debt and Economic Growth: The Nigeria Experience. European Journal of Accounting Auditing and Finance Research, 4(2), 33-48.
39. Olcar, A. (2013), Turkey’s External Debt Problem and the Effects of the Crisis. Hitit University, Institute of Social Sciences, Corum.
40. Parasiz, I. (2008). Fundamentals of Modern Macro Economy (Modern Makro Ekonominin Temelleri). Ezgi Bookstore, Bursa.
41. Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds testing approaches to the analysis of Level Relationships. Journal of Applied Econometrics, 16(3), 226-339.
42. Phillips, P.C.B., & Perron, P. (1988). Testing For a Unit Root in Time Series Regression. Biomètrika, 75(2), 336-346.
43. Romer, P.M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94, 1002-1037.
44. Sarac, T. B.; Yucel, M. H. (2017). External Debt and Economic Growth Relationship: Turkey Example. TURAN-SAM: TURAN Strategic Research Center, 9(35), 15- 20.
45. Solow, R.M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70, 65-94.