The Relationship Between Private, Public and Foreign Savings in Turkey

Domestic savings are the primary sources of financing for sustainable economic growth. In recent years, the transformation in domestic savings in Turkey has increased dependency on foreign savings. Therefore, the relationship between private, public and foreign savings has become a more significant and debatable issue for Turkey. This study investigates the relationship among private, public and foreign savings in Turkey from 1984 to 2014. This study analyzes the stability of the series using the multiple structural break unit root test of Lee and Strazicich (2003). Cointegration is examined using of Maki's (2012) cointegration test with multiple structural breaks, and cointegration coefficients are estimated using the dynamic ordinary least squares method. The analysis results indicate that there is a negative and incomplete Ricardian Equivalence Hypothesis between private and public savings. Furthermore, it is determined that foreign savings have a negative, or substitutive, effect on private savings.