The role of defence on external indebtedness: An assessment of Turkey

Abstract

Turkey has been undergoing a severe economic crisis recently. Despite its low standing in terms of basic economic and welfare indicators, Turkey has been leading in arms imports. The pressing issues of macroeconomic imbalances are budget deficits, current account deficits and external debt burden. Previous work on the trade-off between defence and growth and between defence and budget deficits concludes that the presence of such trade-offs is not confirmed. As budget deficits are financed through internal and external debt, this paper attempts to explore to what extent defence might be contributing to Turkey's current account deficits and external indebtedness since the 1980s. Related data problems are also assessed.