1 Do Defence Expenditures Increase Debt Rescheduling in Turkey? Probit Model Approach

Abstract: This paper empirically investigates the importance of financial and political variables in determining debt rescheduling probabilities in Turkey. The problem of sovereign debt default and rescheduling has been subject of substantial academic research during the last two decades. There have been criticism of models of developing countries indebtedness and rescheduling that relies solely on some economic or financial predictors related to country debt, the foreign exchange sector or the domestic economic situation. Using probit analysis, this paper indicates that financial variables are important determinants factors of rescheduling probabilities. However, political variables (importantly defence) are not significant in our models. 2 1