The Analysis of External Debt Sustainability by Periodic Unit Root Test with Structural Break: The Case of Turkey

Abstract

The aim of this study is to investigate external debt sustainability using the periodic unit root rest with structural break which is introduced by Boswijk and Franses (1995) and then developed by Evans (2006). In order to test the hypothesis, we use quarterly Turkish data measuring the ratio of external debt stock to GDP that covers the period from the first quarter of 1990 to the third quarter of 2012. The empirical results support that the ratio of external debt stock to GDP has the periodic behavior under structural change and follows a nonstationary periodic process with structural break. According to the empirical findings, it is argued that the external debt is unsustainable in Turkey.