Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 72667
The Analysis of Public Debt Stock by Using System Dynamics: Turkey Example

Authors: Hatice Altınok

Abstract:

With the 2008 global financial crisis, many countries have applied partly expansionary fiscal policies. These expansionary fiscal policies encompassed tax cuts and increases in government expenditures. As a result of these policy measures taken by governments and the widespread use of borrowing policy caused an increase in public debt stock in economies. Therefore, countries should apply more stable and efficient policies for debt management today. Public debt stock is an important economic issue in developing economies. Therefore, the sustainability of public debt management is important for ensuring economic stability in countries. As a reflection of the changes in the economic and financial structure, the increase and spread of diversification in financial markets, the increase of investors, and the interconnection of markets in the globalization process necessitated the creation of new policies in public debt management. Hence, it is substantial that the public debt stock, which is an important tool in the hands of the government, can be maintained by debt managers. In this study, the public debt stock, which is a dynamic macroeconomic issue, is analyzed for the Turkish economy by using the system dynamics method. System dynamics models are an important tool in the analysis as they can include multiple variables in the system and run feedback loops simultaneously. The model was run with various scenarios using the Turkish economy data, and thus, it was determined with which variables the public debt stock could be sustained. As a result, it has been concluded that public investments as a type of public expenditure should be increased if it is aimed to maintain the public debt stock for the Turkish economy.

Keywords: public debt stock, debt management, system dynamics, Turkey economy

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