DIŞ BORÇ VE CARİ İŞLEMLER DENGESİNİN EKONOMİK İSTİKRAR ÜZERİNDEKİ ETKİSİ
THE EFFECT OF EXTERNAL DEBT AND CURRENT ACCOUNT BALANCE ON ECONOMIC STABILITY

Summary/Abstract: Since the level of domestic savings is low in developing countries, external borrowing is a frequently preferred source for financing economic growth and development. This source is also utilized to cover current account deficits in these countries. Similarly, in Turkey, especially since the 1980s, external debt has almost become an integral part of the economy. Therefore, the impact of this source on macroeconomic variables has been a subject of interest. In this study, the effects of external borrowing and current account deficit on macroeconomic stability are examined for the Turkish economy during the period 1990-2021. An economic stability index was created based on the International Country Risk Guide (ICRG) methodology for the macroeconomic stability variable. Analyses based on the Autoregressive Distributed Lag Model (ARDL) bounds test were conducted. According to the analysis results, in the long term, total external debt service positively affects macroeconomic stability. However, the relationship between them is not statistically significant. A long-term negative and significant relationship was found between the current account deficit and macroeconomic stability. If external debts are channelled into investments with better debt management, external borrowing could have a more positive impact on economic stability. Similarly, to contribute to economic stability through the current account balance, exports should be increased and imports should be reduced in the balance of payments.

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