External debt-economical growing relationship for the terms before and after the 2001 crysis in Turkey: 1991-2010

In order to overcome financial restrictions and so achieve a higher rate of growth, these countries often utilize external loans. 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. Most empirical studies indicate a negative correlation between foreign debt and economic growth. In this study, the relationship between economic growth and foreign debt is discussed in terms of Turkish economy. Using time series data over the 1991?2010 period. The stationarity of time series data used in this study was tested by the ADF test. Cointegration test which is developed by Johansen was used in order to investigate long-term relationship between the variables which are stabilize at the same level or not. A least squares regression analysis and at last in order to obtain effect direction between the variables Granger analysis are performed. Analysis show that foreign debts in Turkey habe a negative effect on economical growth. According to these results, domestic resources should finance the required investments and external resources should be reduced in order to increase economic growth-in Turkey.