While public debt is vital for economic growth and development, a heavy debt burden has adverse effects. Therefore, there is a debate about how public debt will affect economic growth. This study investigates the public debt and economic growth nexus in Türkiye using the Fourier-Augmented ARDL methodology over the years 1968-2019. Although Türkiye has a moderate level of public debt, it has significantly lost its fiscal space because of geopolitical risks, irregular migration, natural disasters, inaccurate economic policies, and the economic crises it has frequently faced in the last decade. Our analysis demonstrates that public debt has a detrimental impact on economic growth, as evidenced by linear and nonlinear models. These findings remain consistent even after conducting robustness checks. However, our nonlinear model differs from the majority by indicating a U-shaped relationship between public debt and economic growth, featuring a 61-63% threshold. Therefore, increasing public debt to stimulate growth is not a viable policy. Instead, policymakers should prioritize borrowing to fund productive investments that increase output and employment rather than financing budget deficits and increasing the debt burden. For Türkiye, these initiatives can increase the welfare of present and future generations and make both public debt and economic growth sustainable.
Oğuzhan Bozatlı (Fri,) studied this question.