The effect of domestic and external borrowing on economic growth

In this study, the effect of domestic and external borrowing on economic growth has been examined, focusing on how they influence each other either directly or indirectly. The causality relationship between them and its direction have also been investigated. The study uses quarterly data from the period 1998–2023, applying the ADF Unit Root Test, Johansen Cointegration Analysis, and Granger Causality Test to analyze the case of Turkey. According to the results of the Granger Causality Test, in the long run, no relationship was found between external borrowing and economic growth, whereas a one-way causality from economic growth to domestic borrowing was detected between domestic borrowing and economic growth.