TURKEY'S DEFENCE EXPENDITURES AND DEBT BURDEN

Gülay Günlük-Senesen, Istanbul University
Selami Sezgin, Pamukkale University

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 (by Sezgin) and on the trade-off between defence and budget deficits (by Günlük-Senesen) conclude that presence of such trade-offs are not confirmed. As Turkey is a capital importing country and as budget deficits are financed through internal and external debt, the basic research question in this paper is: "What is the role of defence expenditures in Turkey's indebtedness?". We estimate a growth rate model for external debt, and find that defence expenditure and expenditure on military equipment do not have significant effects on growth, but growth of arms imports emerges as a significant determinant.