Public Debt and Economic Growth: Does One Size Fit All? Evidence from Fourier-based Empirical Analysis

Overview

This study examines the relationship between public debt and economic growth in Türkiye using Fourier-Augmented ARDL methodology with data spanning 1968-2019. The research addresses the debate regarding optimal public debt levels for economic growth in a country experiencing moderate debt burdens but substantially diminished fiscal space due to geopolitical pressures, irregular migration flows, natural disasters, policy inconsistencies, and recurrent economic crises.

Methods and approach

The analysis employs Fourier-Augmented ARDL methodology to investigate both linear and nonlinear relationships between public debt and economic growth. The Fourier approach enables detection of structural breaks and nonlinear dynamics without requiring predetermined break dates. The methodology incorporates robustness checks to validate findings across model specifications. The temporal scope encompasses 1968-2019, providing extensive longitudinal coverage of Türkiye's fiscal dynamics and macroeconomic performance.

Key Findings

Both linear and nonlinear models demonstrate that public debt exerts a detrimental effect on economic growth in Türkiye. The nonlinear specification reveals a U-shaped relationship between public debt and growth, characterized by a threshold range of 61-63% debt-to-GDP. This threshold departs from findings in broader comparative analyses. The U-shaped functional form indicates that debt impacts vary across debt accumulation levels, with implications for policy positioning relative to the identified threshold. Robustness testing confirms the consistency of these findings across alternative specifications.

Implications

The empirical evidence indicates that unconditional debt expansion as a growth stimulation mechanism lacks viability for Türkiye's macroeconomic context. The identification of a U-shaped relationship with a 61-63% threshold suggests that debt accumulation effects are nonmonotonic, contingent upon the existing debt stock. Policymakers require differentiated debt management strategies that account for positioning relative to identified thresholds rather than pursuing uniform debt reduction or expansion.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.