External debt problem and the impact of external debt on the growth: Turkish experience

Insufficient resources, which are necessary for economic development, force the less-developed and developing countries to find external resources. In such a case, external debt is important financial resources for these countries. External debt is also important resource for Turkey such as in the world countries. In Turkish economy, external debt is taken generally in order to counter the saving deficit and foreign exchange deficit and reach the high growth rate. External debts, which are initially taken as additional resources, can accelerate the investments, economic growth and development when they are used efficiently. But if the external debts aren?t used efficiently and the principal and interest payments of the external debts become higher than national income increase, it is required to get debts again to pay debts and thereby it causes to increase external debt burden and decrease the country welfare. It is required to make analysis by considering some criteria in order to determine whether external debts transferred to the economy are used efficiently or not and the countries must get debts according to these results. The aim of this study is to evaluate the impact of external debt stock and external debt servicing to the economy from the Ottoman Empire to today and to explain the impact of external debt stock, external debt servicing, public and private investments to the economic growth for the 1970-2005 period in Turkey by using the cointegration analysis based on time series. In this study, it is resulted that external debt stock, external debt servicing affected the growth negatively and Turkey faced with the debt overhang problem in the period of 1970- 2005.