Effects of some economic indicators in public debt in Turkey: A dynamic analysis for the period 2002-2017

Due to the budget deficits and as a financial policy instrument, public debt can be used in accordance with the conjuncture of the economy. There are many studies in the literature in the field of public debt. In these studies, the relationship between total debt stock and growth or internal and external borrowing and economic growth has been examined separately. In this study, as a contribution to the literatüre, not only the total stock value of the government debt but also the domestic and foreign debt stock values were examined as dependent variables in three different models. The implementation period is 2002-2017. ARDL and ECM analyzes were used as the method of application. In the application phase; total public debt stock value, total public internal debt stock value and total public external debt stock value were used as dependent variables and the short and long term effects of current balance, budget balance, fixed capital investment, employment, domestic and foreign interest rates on each. According to the analysis results, public debt in the long run is mainly due to the increase in the current account deficit. The appreciation of the Turkish Lira also has an increasing effect on public debt. As a result, the execution of the equivalent budget policy during the implementation part of the work had a decreasing effect on public debt. This result is understood according to positive relationship between budget balance and public debt. There is a positive relationship between fixed capital investments and domestic debt stock. In other words, the increase of fixed capital investments increases domestic debt. The increase in the employment rate has an impact on external debt. There is a negative relationship between the domestic interest rate and the domestic debt stock, and the foreign interest rate and the external debt stock. This situation presents that domestic and foreign interest rates are effect on public debt. Also the Error Correction Mechanism for all three models has been achieved.