The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye
Global financial conditions are one of the key elements that should be considered while formulating fiscal policy. Investments and capital inflows to small open emerging economies are impacted by global financial conditions. Investments in the assets of emerging economies rise during times of favora...
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| Format: | Article |
| Language: | English |
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Istanbul University Press
2023-08-01
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| Series: | İktisat Politikası Araştırmaları Dergisi |
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| Online Access: | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/7A987BC32FA44EE7B3221A845BD9760B |
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| author | Süleyman Kasal |
| author_facet | Süleyman Kasal |
| author_sort | Süleyman Kasal |
| collection | DOAJ |
| description | Global financial conditions are one of the key elements that should be considered while formulating fiscal policy. Investments and capital inflows to small open emerging economies are impacted by global financial conditions. Investments in the assets of emerging economies rise during times of favorable global financial circumstances. Thus, the amount of borrowing, the cost of borrowing, and the debt structure of emerging economies are all impacted by the existence of favorable global financial conditions. In contrast, similar to the COVID-19pandemic in 2020 and the 2008 global financial crisis, the worsening in global financial conditions has a negative impact on emerging economies. Global financial conditions are an important component of public finance and play a significant role in government debt. This study attempts to investigate the impact of global financial shock risks on macroeconomic fluctuations and government debt in Türkiye from 2003:1 to 2020:12 using a vector autoregressive model. The results of the analysis showed that a positive shock in global financial risks increases government debt. The findings pointed out that the government debt is sensitive to global shock risk. Global financial conditions account for approximately 12% of changes in government debt at the end of two years. The findings of this study also indicated that global financial shock risks have a significant impact on macroeconomic fluctuations. These findings imply that reducing vulnerability of Türkiye to external shocks is a key policy priority for the sustainability of government debt. Because the country's sensitivity to external shocks may enhance the likelihood of a government debt crisis. To avoid concerns about debt sustainability, the share of foreign currency liabilities in government debt should be reduced. |
| format | Article |
| id | doaj-art-e17fc3d0cb5443edacaa2e78c784f4e4 |
| institution | OA Journals |
| issn | 2148-3876 |
| language | English |
| publishDate | 2023-08-01 |
| publisher | Istanbul University Press |
| record_format | Article |
| series | İktisat Politikası Araştırmaları Dergisi |
| spelling | doaj-art-e17fc3d0cb5443edacaa2e78c784f4e42025-08-20T01:50:31ZengIstanbul University Pressİktisat Politikası Araştırmaları Dergisi2148-38762023-08-0110233736010.26650/JEPR1112862123456The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of TürkiyeSüleyman Kasal0Anadolu Üniversitesi, Eskişehir, TürkiyeGlobal financial conditions are one of the key elements that should be considered while formulating fiscal policy. Investments and capital inflows to small open emerging economies are impacted by global financial conditions. Investments in the assets of emerging economies rise during times of favorable global financial circumstances. Thus, the amount of borrowing, the cost of borrowing, and the debt structure of emerging economies are all impacted by the existence of favorable global financial conditions. In contrast, similar to the COVID-19pandemic in 2020 and the 2008 global financial crisis, the worsening in global financial conditions has a negative impact on emerging economies. Global financial conditions are an important component of public finance and play a significant role in government debt. This study attempts to investigate the impact of global financial shock risks on macroeconomic fluctuations and government debt in Türkiye from 2003:1 to 2020:12 using a vector autoregressive model. The results of the analysis showed that a positive shock in global financial risks increases government debt. The findings pointed out that the government debt is sensitive to global shock risk. Global financial conditions account for approximately 12% of changes in government debt at the end of two years. The findings of this study also indicated that global financial shock risks have a significant impact on macroeconomic fluctuations. These findings imply that reducing vulnerability of Türkiye to external shocks is a key policy priority for the sustainability of government debt. Because the country's sensitivity to external shocks may enhance the likelihood of a government debt crisis. To avoid concerns about debt sustainability, the share of foreign currency liabilities in government debt should be reduced.https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/7A987BC32FA44EE7B3221A845BD9760Bglobal financial risksmacroeconomic fluctuationsgovernment debttürkiyevar |
| spellingShingle | Süleyman Kasal The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye İktisat Politikası Araştırmaları Dergisi global financial risks macroeconomic fluctuations government debt türkiye var |
| title | The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye |
| title_full | The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye |
| title_fullStr | The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye |
| title_full_unstemmed | The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye |
| title_short | The Role of Global Financial Risk Shocks on Macroeconomic Fluctuations and Government Debt: The Case of Türkiye |
| title_sort | role of global financial risk shocks on macroeconomic fluctuations and government debt the case of turkiye |
| topic | global financial risks macroeconomic fluctuations government debt türkiye var |
| url | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/7A987BC32FA44EE7B3221A845BD9760B |
| work_keys_str_mv | AT suleymankasal theroleofglobalfinancialriskshocksonmacroeconomicfluctuationsandgovernmentdebtthecaseofturkiye AT suleymankasal roleofglobalfinancialriskshocksonmacroeconomicfluctuationsandgovernmentdebtthecaseofturkiye |