This paper considers impact of military spending on debt in a panel of 11 small industrialising economies using panel data methods. It provides estimates for fixed effects and random effects models and then moves on to consider dynamic models. The dynamics are found to be important and the results suggest that military burden does indeed have a positive impact on the share of external debt in GDP.

This study aims to contribute to the understanding of the impact of external debt on economic growth by using the data for moderately indebted middle-income countries over the period of 1985-2013. The paper employs a relatively recent panel analysis technique, the common correlated effects (CCE) framework, which considers cross-sectional dependence and heterogeneity implications in the data. Our overall findings suggest a negative linear effect of external debt for the panel despite some exceptions in the country-specific results. In the panel results, the impact of external indebtedness occurs through the debt stock rather than a direct impact of liquidity constraint represented by a debt service variable.

No abstract

The extent of current account deficits in the Turkish economy has reached alarming levels in the past few years. Beside other arguments, one line of debate has recently been put forward by the Central Bank of the Republic of Turkey; it is stated that credit expansion in the economy has been one of the leading reasons behind the large current account deficits. When the annual credit growth reached the level over 30 per cent in 2010, concerns regarding financial and macroeconomic stability were pronounced, and some policy measures were taken by the central bank in order to bring credit growth down to more 'sustainable' levels, as stated. This study aims to empirically analyse the relationship between current account balances and domestic credit dynamics in the case of Turkey. To this end, the paper employs the ARDL bounds testing methodology and investigates causality implications between domestic credit and external balance variables. The empirical findings of the study suggest Granger causality running from domestic credit growth to external balances.

Two main forms of capital movements, namely portfolio and direct investments, towards developing countries have been studied from various angles. It is very often argued that direct investments have better implications for economic development and growth as they provide more stable and long-term resources. Foreign direct investment is also regarded to be a healthier means for financing current account deficits. However, widening current account deficits in most of the developing economies in the past few decades have brought about the question of implications of capital movements, including FDI, for those imbalances. This paper empirically investigates the relationship between current account balances and FDI in a group of developing economies by considering the channels for this relationship. To provide an empirical analysis, a panel Granger causality framework is employed with the data on FDI, exports and imports, by using the methodology developed by Konya (2006). The empirical results of the study do not provide conclusive results; the countries in the panel seem to have various links between FDI and international trade components.