Abstract:

The aim of this study is to analyze the relationship between foreign debt, economic growth and trade balance in Turkey. The study used data from the 1998:Q1-2017:Q4 period of the Turkish economy, based on the VAR model. The results of causal analysis have shown that the external debt stock has a double-directional causal relationship over the non-profit domestic earnings, while the balance of currency transactions has a single-directional causal relationship over the non-profit domestic earnings and the external debt stock. In the result of the influential function, the reaction of the non-profit domestic revenue to changes in external debt increases, the reaction of the change in the balance of currency transactions decreases; the reaction of the external debt to changes in non-profit domestic revenue increases, the reaction of the change in the balance of currency transactions decreases. According to these findings, in Turkey, the currency gap has a positive impact on economic growth and external debt and external debt on economic growth.

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