Determinants of Economic Growth in Türkiye: A Dynamic ARDL Simulation Analysis of External Debt, Government Size, and Energy Use

This study investigates the determinants of economic growth in Türkiye by examining the roles of external debt, government size and energy consumption over the period 1970–2019. Using the novel Dynamic Autoregressive Distributed Lag (DYNARDL) simulation approach, this study captures both short- and long-run effects and generates counterfactual simulations that visualize how GDP responds to shocks in each variable. The results reveal three consistent patterns. First, external debt exerts a significant drag on growth in both the short and long run, supporting the debt overhang hypothesis and underscoring the risks of persistent borrowing. Second, government size constrains growth in the short term, likely due to crowding-out and inefficiencies, but its long-run effect appears neutral, reflecting structural fiscal reforms implemented in the aftermath of major crises, notably the 2001 financial crisis. Third, energy consumption emerges as a strong driver of output, emphasizing the critical role of energy security and efficiency in sustaining industrial expansion. Human capital, included as a control variable, also contributes positively in both horizons, reinforcing productivity gains through education and workforce quality. These findings highlight the need to redirect public expenditures toward efficiency-enhancing uses, strengthen debt sustainability frameworks, and expand investments in renewable energy and technological upgrades to reduce import dependency. Continued progress in education and skills development will further support long-term growth. By integrating dynamic simulations and counterfactual analysis with structural growth drivers, this study provides new evidence for Türkiye and demonstrates how simulation-based approaches can enrich growth diagnostics in other emerging economies.