External debt sustainability: The case of Turkey (1980-2010)

Public deficits come from beginning of the most important macroeconomic problems in most of the developed and developing country economies. Economic literature on the explanation of public deficits has been focusing on two main issues. These one of the topics is the accumulation of public debts in recent decades and, on the other hand, the large observed cross-countries differences on public deficits and debt. In many developing country economies, insufficient resources which are necessary for economic growth and development, force the developing countries to find external resources. As a result of this situation, external debt is important financial resources for these countries.External debt is also very important resource for Turkey's economy such as in both many developed and developing country?s economies. In this context, external debt is taken generally in order to counter the saving and foreign exchange deficits and reach the high growth rate in our country. As a result of insufficient resources of country, external debts which are initially taken as additional resources can accelerate the investments, economic growth and development when they are used efficiently. However, if the external debts aren?t used effectively and 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. As a result of this, it causes to increase external debt burden and decrease the country welfare.External borrowing has a privileged position due to its purposes of received and its structure in a country?s economy. For this reason, 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 in the process of political decision. The aim of this study is to evaluate the impact of external debt stock and external debt servicing to the economy from the 1980 to today and to explain the sustainability of external debt between 1980-2010 periods in Turkey by using the cointegration analysis based on time series.Keywords: Public Deficits, Public Debt, External Debt, Cointegration, External Debt Sustainability