Sustainability of i̇nternal debt: after 1980 Turkey sample

Internal debt that is one of the solutions referred for financing of the public deficits might be the main reason of many economic problems. In this context, problem of internal debt was an important problem in different aspects not only for developing countries but also developed countries. Today, internal debt that is an important resource for Turkey, as is in many countries, might cause negative macroeconomic effects because of its easy and uncontrolled use, and it might result in crises disturbing the general economic balance. In Turkey, internal debt has stopped being an extraordinary source of income and taken place among the sources of recurring revenue. Internal debt becomes more important every passing day as internal debt has been a source referred by fiscal, economic and political reasons especially since the middle of 1980's and due to ever-increasing amounts of debt. From past to present, internal debt that has been a subject to many scientific studies is one of the most attractive subjects in public finance. As well as discussions made on internal debt and its economic effects continue, increases in internal debt stock brought up the discussions on sustainability of internal debts. As part of our study, the developments emerged in Turkey after 1980 have been evaluated in theory in the light of official data as well as empirical analysis, and causes of the increase appeared in internal debt stock were tried to be explain through tables. In this study, it was tried to analyze if long-term relations of indicators such as primary balance, reel rate of interest and reel rate of growth maintained sustainability of internal debts in Turkey between the years of 1980 and 2014. First, steady state of the series of primary balance, reel rate of interest and reel rate of growth was tested by unit root tests. Then, co-integration analysis was conducted in order to determine if there is a long-term relation between the series. And as the result of this test, it was determined that there is co-integration and a long-term relation between the series. Finally, Toda-Yamamoto (1995) causality test was carried out in order to test sustainability of internal debts. According to the results of test in question, a bi-directional causality relation was found between reel rate of interest and primary balance; and a unidirectional causality relation was determined from reel rate of interest to reel growth. Findings obtained from the study indicate that internal debts were sustainable in Turkey in the period between the years of 1980 and 2014.