Open AccessGrowth-Maximizing Public Debt in Turkey: an Empirical Investigation
Author(s) -
Gokay Canberk Bulus
Publication year - 2020
Publication title -
economics and business review/the poznań university of economics review
Language(s) - English
Resource type - Journals
eISSN - 2392-1641
pISSN - 1643-5877
DOI - 10.18559/ebr.2020.3.4
Subject(s) - economics , debt , debt to gdp ratio , debt ratio , monetary economics , debt service ratio , econometrics , investment (military) , estimator , real gross domestic product , external debt , macroeconomics , statistics , mathematics , politics , political science , law
The aim of the paper is to empirically estimate the growth-maximizing debtto-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 growthmaximizing 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.