The Analysis of the Relationship Between Defence Spending, Arms Import and External Debt in Turkey: ARDL Bound Testing Approach

Debt and deficits are important for an economy, and deficit spending policy positively affects economic growth. However, if external debt increases too much, it may also lead to economic problems. In the literature that was given relatively little information to defence spending contributing substantially to government debt level in the studies focused on the determinants of debt. Turkey is a country allocating more funds to its defence spending and arms import in recent years. Therefore, to what extent its defence expenditures and arms import is effective in increased debt stock is a subject of debate. To conclude this issue, this study examines the relationship between defence spending, arms import, and external debts through ARDL bund test with annual data for the 1975- 2017 period. The findings show that there is a positive and statistically significant relationship between defence expenditures and arms import and foreign debt in the short and long term.