Theory of Public Debt and Current Reflections

Abstract

From the ancient ages to today, administrations needed continuous financing and met this financing with various sources. The process of social development necessitated public borrowing for different purposes ranging from creation of a consumer society to sell the surplus of developed countries to postwar human relations and from the development financing of developing countries to the payment of debt by debt. Particularly after World War II (1941-1945), the developed countries provided the external resources to developing countries for development financing. As a result of the increase in the mobility of capital in the process of globalization (especially short-term speculative capital investments), developing countries were dragged to the debt-interest helix problem and the external debt crises. The stabilization programs proposed by the IMF led to government guarantee of private sector external debts in the developing countries and led to a rapid increase in the public debt stock.

Economic growth: macroeconomic effects of Public Borrowings at the global level

“…The criteria of debt classification also include: influence on the state economy, and the structure of debt. Short-term debts exist for solving current problems, whereas long-term ones operate for capital investments and large-scale state projects (Aybarç, 2019;Açba, 1994;Corina, 2013;Erdem, 2016;Bekar, 2018).…”

“…In the opinion of Aybarç (2019) and other scholars, public debt is divided into external and internal. As for external debt, in order to ensure economic growth, such debts should be returned at the expense of interest on profits.…”

“…As for external debt, in order to ensure economic growth, such debts should be returned at the expense of interest on profits. When investing in production, external debt positively affects the state's economy (Aybarç, 2019; Anning, Ofori, & Affum, 2016; Kopits, 2001). Aybarç (2019) stated that debts can also be divided into debts for development and forced debts.…”

“…When investing in production, external debt positively affects the state's economy (Aybarç, 2019; Anning, Ofori, & Affum, 2016; Kopits, 2001). Aybarç (2019) stated that debts can also be divided into debts for development and forced debts. Forced debts are received in case of emergency or when crisis situations occur (severe economic downturn, social and political instability, war, etc.).…”

Empirical Investigation into the Determinants of Public Debts in Africa: New Insights Using a Panel Bayesian Model Averaging Approach

“…A theoretical foundation for the hypothesis that economic grievances generate public debt, based on the rational-choice theory and without dismissing non-economic factors, can be found in the seminal papers of Fatás et al (2019), Aybarç (2019), Alesina and Passalacqua (2016) and Bilan (2016). These authors suggest that the lack of empirical consensus on the causes of debt has to do with its heterogeneity and that its link with the economy needs to be further investigated, especially in developing countries.…”