Econometric Analysis of Causal Relationship Between External Debt and Inflation in Türkiye: Frequency Domain Causality Approach

The primary objective of this study is to examine the causal nexus between external debt and inflation in Türkiye and to determine whether this relationship is persistent or transitory. Using quarterly data on total external debt stock and the consumer price index for the 2004Q01–2025Q01 period, this study analyzes causal relationships across the short, medium, and long run within the frequency-domain causality framework. According to the empirical results, no causal relationship from inflation to external debt is detected in any period; however, a unidirectional causality exists from external debt to inflation in the short and medium run, although this relationship does not hold in the long run. The study's findings indicate that external debt is a driver of inflation in Türkiye, but the causal relationship is not persistent. These results offer significant implications for anti-inflationary policies and debt management strategies.