Author/Authors :
ŞANLI, F. Bahar İstanbul Üniversitesi - İktisat Fakültesi, Turkey , AKSÖZ, Hande İstanbul Üniversitesi - İktisat Fakültesi, Turkey
Abstract :
Debt is one of the most important financing sources of countries. External borrowing is done especially by Developing Countries in order to sustain economic progress, as domestic savings are inadequate. External borrowing in the World showed up by liberalization of capital flows towards the end of 1980s. Effective mid-1990s, globalization was accelerated, dependency of countries were increased, expanded credit needs increased the demand of outsourcing. Yet in Turkey, it is observed that external borrowing has been done from time to time since the Republic was announced. In 1960s, to resolve the lack of domestic savings and in 1970s, to meet external payments against increasing rates due to petrol crisis, external borrowing was put forward. With the liberalization process began in 1980, external borrowing increased, it began to be an often referenced financing tool, with the liberalization of foreign capital movements’ decision taken in 1989, and in order to maintain development. In this study, which tries to examine the effect of domestic savings on external borrowing in Turkey since 1980s, the short and long term relation between external borrowing and domestic savings was analyzed by using Johansen-Juselius co-integration and Engle-Granger (Vector) error correction models. According to the analysis; there is a negative relation between external borrowing and domestic savings both in short and long terms. Thus, in solving the problem of Turkey’s foreign debt as a priority, one can say policies that will increase the amount of domestic savings should be adopted. An increase in domestic savings in Turkey might save the country from being dependent on foreign borrowing.
NaturalLanguageKeyword :
External Debt , Domestic Savings , Cointegration , Exchange Rate , Vector Error Correction
