Hidden Overhang of Domestic Debt and Its Role in the This-Time-Is-Different Syndrome: An Empirical Contingent Liabilities Model


Ozkaya A.

EMERGING MARKETS FINANCE AND TRADE, vol.50, no.4, pp.73-94, 2014 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 50 Issue: 4
  • Publication Date: 2014
  • Doi Number: 10.2753/ree1540-496x500405
  • Title of Journal : EMERGING MARKETS FINANCE AND TRADE
  • Page Numbers: pp.73-94
  • Keywords: chaotic dynamics, contingent liabilities, debt intolerance, hidden public debt, this-time-is-different syndrome, Turkey, FISCAL RULES, LYAPUNOV EXPONENTS, TURKEY, DEFICITS, SERIES, CRISIS, BAD, EU

Abstract

The recent studies in public finance literature open an exciting research area on hidden overhang of domestic public debt and creative accounting. In this study, I identify hidden public debts in Turkey. I then develop a dynamical model that takes as given the stock of contingent liabilities generated by lending/borrowing relationships among public entities and looks for the debt (in)tolerance of government to liquidate it in finite periods. Last, I introduce a general empirical methodology to analyze the role of overborrowing in the this-time-is-different syndrome and test model outcome against data for hidden debts in Turkey's postliberalization period (1989-2010).