Foreign Debt Sustainability: Tests Of Intertemporal Budget Constraint

Sabri Azgun ()
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Sabri Azgun: Yuzuncu Yil University

Anadolu University Journal of Social Sciences, 2005, vol. 5, issue 2, 57-68

Abstract: Solvency is derived from the intertemporal budget constraint which shows sustainability of current policies. Generally, when the expected value of the future resources devoted to debt service equals the current debt stock, solvency condition is satisfied. Main objective of this study is to test whether Turkish economy satisfies debt sustainability criteria in light of foreign debt repayment. On the basis of national accounting identity which Sawada (1994) suggests, sustainability conditions determined by Wilcox (1989) and Hakkio- Rush (1991) propositions are tested with unit root and co- integration methods. Econometric results obtained demonstrate that solvency condition is satisfied in consideration of foreign debt repayment of Turkish Economy.

Keywords: Foreign Debt Sustainability; Intertemporal Solvency; Cointegration; Unit Root; Turkey. (search for similar items in EconPapers)
JEL-codes: C50 F34 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:and:journl:v:5:y:2005:i:2:p:57-68

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