CAUSES EXTERNAL DEBT OF THE PRIVATE SECTOR IN TURKEY: A MACROECONOMIC APPROACH

CAUSES EXTERNAL DEBT OF THE PRIVATE SECTOR IN TURKEY: A MACROECONOMIC APPROACH.................................................................................

ABSTRACT The study investigated the reasons of the external debt stock of the private sector using the Autoregressive Distributed Lag Model (ARDL) and Error Correction Model (ECM) analysis with quaterly data in the period of 2000-2016 in Turkey. According to the ARDL results of Model 1, in which examined reasons of the short run external debt stock of the private sector; there are positive relationship between short run external debt stock, budget deficit, real exchange rate and import volume in the long period. Beside, budget deficit has stronger impact on the short run external debt stock than the other variables. Other side external interest rate’s effects is weak and negative on the short run external debt of the private sector. ARDL results of the Model 2 in which examined reasons of the long run external debt stock of the private sector; there is positive relationship between foreign interest rate, economic stability, fixed capital expenditure, export volume and long run external debt stock in the long period. Other side, there is negative relationship between real exchange rate and long run external debt stock. Economic stability has stronger impact than the other variables on the long run external debt. ECM results of Model 1 and Model 2 was showed that imbalance in the short run will improve in the long run for both models.