The effects of public debt on economic growth: The case of Turkey

In the growth and development processes of the countries, it has become a frequently discussed topic today, in which direction and to what extent the public borrowings, which have been increasing constantly and have become the ordinary income of the public, affect the economic growth. The relationship between public debt and economic growth is very important for both developed and developing countries. Developing countries often prefer government borrowing due to the inadequacy of savings primarily to provide financing for development. As in developing countries, the fact that Turkey's domestic savings are insufficient to finance investments prevents it from reaching the desired economic growth rate. The aim of the study is to determine the effects of public debt on economic growth in Turkey. In this regard, the effects of domestic and foreign public borrowing on economic growth in the 2002Q3-2020Q3 period were tested with the help of Vector Autoregression (VAR) analysis. According to the results obtained, while the reductions in public domestic borrowing in Turkey cause an upward movement in GDP; Decreases in public external borrowing cause reductions in GDP. Therefore, there is an inverse direction between public domestic borrowing and GDP in the Turkish economy; It is possible to talk about a direct relationship between public external borrowing and GDP. In this regard, it is very important to determine the most appropriate policy by making a good determination of the policies for public borrowing in order to ensure economic growth and development in the Turkish economy. KEYWORDS: Economic Growth, Example of Turkey, Public Debt, VAR Analysis