Growth-maximizing public debt in Turkey: An empirical investigation

Bulus Gokay Canberk ()
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Bulus Gokay Canberk: Aksaray University, Faculty of Economics and Administrative Sciences, Department of Economics, 68100Aksaray, Turkey

Economics and Business Review, 2020, vol. 6, issue 3, 68-87

Abstract: The aim of the paper is to empirically estimate the growth-maximizing debt-to-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 growth-maximizing 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.

Keywords: public debt; economic growth; fiscal rule; Turkish economy (search for similar items in EconPapers)
JEL-codes: H63 H68 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:6:y:2020:i:3:p:68-87:n:4

DOI: 10.18559/ebr.2020.3.4

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