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

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).