Hidden Overhang of Domestic Debt and Its Role in the This-Time-Is-Different Syndrome: An Empirical Contingent Liabilities Model

Ata Özkaya

Emerging Markets Finance and Trade, 2014, vol. 50, issue 4, 73-94

Abstract: The recent studies in public finance literature open an exciting research area on hidden overhang of domestic public debt and creative accounting. In this study, I identify hidden public debts in Turkey. I then develop a dynamical model that takes as given the stock of contingent liabilities generated by lending/borrowing relationships among public entities and looks for the debt (in)tolerance of government to liquidate it in finite periods. Last, I introduce a general empirical methodology to analyze the role of overborrowing in the this-time-is-different syndrome and test model outcome against data for hidden debts in Turkey's postliberalization period (1989-2010).

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:50:y:2014:i:4:p:73-94

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DOI: 10.2753/REE1540-496X500405

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