The macroeconomic determinants of external debt in Ottoman Empire: A study of data from 1881–1913

Lotfi Demikha; Amir Shaharuddin; Mahmoud Mohamed Ali Mahmoud Edris

doi:10.33102/jmifr.v18i1.336

Authors

Lotfi Demikha Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia
Amir Shaharuddin Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia
Mahmoud Mohamed Ali Mahmoud Edris Faculty of Syariah and Law, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malaysia

DOI:

https://doi.org/10.33102/jmifr.v18i1.336

Keywords:

External debt, ARDL, Ottoman empire, economic growth, trade openness

Abstract

The 19^th century witnessed noticeable events that shaped the geopolitical and economic spheres in both Europe and Ottoman Empire. Internationally, the industrial revolution, the economic crisis, and the Crimean War were some of those. By 1870, the OE declared its bankruptcy and this decision went viral into the international market, which in fact led to tighten the conditions by the European powers to obtain foreign capital. This study aims to provide a new insight on the external debt determinants using the economic data 1881 to 1913. Applying ARDL as an econometric approach to determine the interrelationship, the findings of the study reveal that the economic growth is negatively associated with the external debts. Also, the study found that government expenditure is having a positive relationship with the accumulation of external debts.

Downloads

Download data is not yet available.

Author Biographies

Lotfi Demikha, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

Amir Shaharuddin, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

Mahmoud Mohamed Ali Mahmoud Edris , Faculty of Syariah and Law, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malaysia

References

Ada, M. S., Agu, O. C., & Umunna, G. (2016). Impact of external debt on economic growth in Nigeria: An ARDL bound testing approach. Journal of Economics and Sustainable Development, 7(10), 16-26.

Ajayi, S. I., & Khan, M. S. (2000). External debt and capital flight in Sub-Saharan Africa. International Monetary Fund.

Akram, N. (2011). Impact of public debt on the economic growth of Pakistan. The Pakistan Development Review, 50(40), 599-615.

Akarli, E. D. (1992). Economic policy and budgets in Ottoman Turkey, 1876–1909. Middle Eastern Studies, 28(3), 443-476.

Alam, N., & Taib, F. (2012). Debt burden shifting and welfare loss in countries under debt trap. European Scientific Journal, 8(22), 159-172

Auboin, M. (2004). The trade, debt and finance nexus: At the cross-roads of micro-and macroeconomics (Discussion Paper, No. 6). World Trade Organization.

Awan, A., Asghar, N., & Rehman, H. U. (2011). The impact of exchange rate, fiscal deficit and terms of trade on external debt of Pakistan. Australian Journal of Business and Management Research, 1(6), 10-24.

Bader, M., & Magableh, I. K. (2009). An enquiry into the main determinants of public debt in Jordan: An econometric study. Dirasat Administrative Sciences, 36(1), 181-190.

Basah, M. Y. A., Yusuf, M. M., & Sabri, H. (2007). Financial development and economic growth evidence from Malaysia. The Journal of Muamalat and Islamic Finance Research, 4(1), 59-82.

Bilquees, F. (2003). An analysis of budget deficits, debt accumulation and debt instability. The Pakistan Development Review, 42(3), 177-195.

Birdal, M. (2006). The Ottoman public debt administration and its role in the peripheralization of the Ottoman Empire. University of Southern California.

Blaisdell, D. C. (1929). European financial control in the Ottoman Empire: A study of the establishment, activities, and significance of the administration of the Ottoman public debt. Columbia University Press.

Bordo, M. D., & Meissner, C. M. (2006). The role of foreign currency debt in financial crises: 1880–1913 versus 1972–1997. Journal of Banking & Finance, 30(12), 3299-3329.

Burnside, C., & Dollar, D. (2004). Aid, policies, and growth: Revisiting the evidence (Policy Research Working Paper, No. 3251). World Bank

Calderón, C., & Fuentes, J. R. (2013). Government debt and economic growth (IDB Working Paper Series, No. IDB-WP-424). Inter-American Development Bank.

Chenery, H., Strout, A. M. (1966), Foreign assistance and economic development. American Economic Review, 56(4), 679-733.

Chikuba, S. M. (2003). The impact of external debt on Zambia's economic growth. National Graduate Institute for Policy Studies.

Clements, M. B. J., Bhattacharya, M. R., & Nguyen, T. Q. (2003). External debt, public investment, and growth in low-income countries (IMF Working Paper, No. 3-249). International Monetary Fund.

Conte, G., & Sabatini, G. (2014). The Ottoman external debt and its features under European financial control (1881-1914). The Journal of European Economic History, 43(3), 69.

Ricardo, D. (1817). On the principles of political economy and taxation. Library of Economics and Liberty.

Easterly, W. (2002). How did heavily indebted poor countries become heavily indebted? Reviewing two decades of debt relief. World Development, 30(10), 1677–1696.

Edo, S. E. (2002). Financial management analysis of contributions of external and domestic factors to foreign debt accumulation in Nigeria and Morocco. Journal of Financial Management & Analysis, 15(2), 69-75.

Eldem, E. (1999). The imperial Ottoman bank: Actor or instrument of Ottoman modernization? Modern banking in the Balkans and West-European capital in the 19th and 20th centuries. Ashgate Publishing Limited.

Eldem, E. (2005). Ottoman financial integration with Europe: Foreign loans, the Ottoman bank and the Ottoman public debt. European Review, 13(3), 431-445.

Ezeabasili, V. N., Isu, H. O., & Mojekwu, J. N. (2011). Nigeria’s external debt and economic growth: An error correction approach. International Journal of Business and Management, 6(5), 156-170.

Ferguson, N., & Schularick, M. (2006). The empire effect: The determinants of country risk in the first age of globalization, 1880–1913. The Journal of Economic History, 66(2), 283-312.

Folorunso, B. A., & Falade, O. E. (2013). Relationship between fiscal deficit and public debt in Nigeria: An error correction approach. Journal of Economics and Behavioral Studies, 5(6), 346.

Forslund, K., Lima, L., & Panizza, U. (2011). The determinants of the composition of public debt in developing and emerging market countries. Review of Development Finance, 1(3-4), 207-222.

Geyikdagi, V. N. (2011). The economic views of a nineteenth century Ottoman intellectual: The relationship between international trade and foreign direct investment. Middle Eastern Studies, 47(3), 529-542.

Gokmenoglu, K., & Rafik, R. A. M. (2018). Determinants of external debt: The case of Malaysia. In N. Ozatac & K. Gokmenoglu (Ed), Emerging trends in Islamic banking and finance (pp. 16-33). Springer.

Grennes, T., Caner, M., & Koehler-Geib, F. (2010). Finding the tipping point--when sovereign debt turns bad. The World Bank.

Hansen, B. E. (2000). Sample splitting and threshold estimation. Econometrica, 68(3), 575-603.

Hajivassiliou, V. A. (1987). The external debt repayments problems of LDC's: An econometric model based on panel data. Journal of Econometrics, 36(1-2), 205-230.

Imimole, B., Imoughele, L. E., & Okhuese, M. A. (2014). Determinants and sustainability of external debt in a deregulated economy: A cointegration analysis from Nigeria (1986-2010). American International Journal of Contemporary Research, 4(6), 201-214.

Kemal, A. R. (2001). Debt accumulation and its implications for growth and poverty. The Pakistan Development Review, 40(4), 263-281.

Khattry, B., & Rao, J. M. (2002). Fiscal faux pas?: An analysis of the revenue implications of trade liberalization. World Development, 30(8), 1431-1444.

Kohler-Toglhofer, W., & Zagler, M. (2007). The composition of the government budget and the dynamics of public debt. FinanzArchiv: Public Finance Analysis, 63(2), 244-263.

Kremers, J. J., Ericsson, N. R., & Dolado, J. J. (1992). The power of cointegration tests. Oxford Bulletin of Economics and Statistics, 54(3), 325-348.

Masruki, R., Hussainey, K., & Aly, D. (2018). Financial impact on the accountability of Malaysian State Islamic Religious Councils (SIRC). The Journal of Muamalat and Islamic Finance Research, 15(2), 21-38. https://doi.org/10.33102/jmifr.v15i2.175

Narayan, P. (2004). Reformulating critical values for the bounds F-statistics approach to cointegration: an application to the tourism demand model for Fiji (Discussion Paper, No. 2). Monash University.

Oke, M., & Sulaiman, L. A. (2012). External debt, economic growth and investment in Nigeria. European Journal of Business and Management, 4(11), 67-75.

Ostadi, H., & Ashja, S. (2014). The relationship between external debt and foreign direct investment in D8 member countries (1995-2011). Walia Journal, 30(3), 18-22

Pamuk, S. (1987). The Ottoman empire and European capitalism, 1820-1913: Trade, investment and production (Vol. 12). Cambridge University Press.

Pamuk, Ş. (1988). The Ottoman Empire in comparative perspective. Review (Fernand Braudel Center), 11(2), 127-149.

Pamuk, Ş. (2004). Institutional change and the longevity of the Ottoman Empire, 1500–1800. Journal of Interdisciplinary History, 35(2), 225-247.

Pamuk, Ş. (2005). The Ottoman economy in World War I. The Economics of World War I, 112-36.

Pamuk, Ş. (2006). Estimating economic growth in the Middle East since 1820. The Journal of Economic History, 66(3), 809-828

Presbitero, A. F. (2012). Total public debt and growth in developing countries. The European Journal of Development Research, 24(4), 606-626.

Pyeman, J., Noor, N. H. H. M., Mohamad, W. M. F. W., & Yahya, A. A. (2014). Factors affecting external debt in Malaysia: An empirical investigation. In Proceedings of the 1st AAGBS International Conference on Business Management 2014 (AiCoBM 2014) (pp. 449-455). Springer.

Rais, S. I., & Anwar, T. (2012). Public debt and economic growth in Pakistan: A time series analysis from 1972 to 2010. Academic research international, 2(1), 535-544.

Shaharuddin, A. (2020). Guest editors’ notes: COVID-19: The pandemic’s impacts on the economy and realisation of maqasid al-shariah and Islamic finance. The Journal of Muamalat and Islamic Finance Research, 1-2.

Sezgin, S. (2004). An empirical note on external debt and defence expenditures in Turkey. Defence and Peace Economics, 15(2), 199-203.

Tezel, Y. S. (1972). Notes on the consolidated foreign debt of the Ottoman empire: The servicing of the loans. The Turkish Yearbook of International Relations, 12, 89-99.

Tiruneh, M. W. (2004). An empirical investigation into the determinants of external indebtedness. Prague Economic Papers, 3(3), 261-277.

Tuncer, A. C. (2009). What did guide investors decisions during the classical gold standard era? The case of Ottoman Empire, 1880-1914 (No. 2). National Bank of Serbia.

Tunçer, A. C. (2015). Sovereign debt and international financial control: The Middle East and the Balkans, 1870-1914. Palgrave Macmillan.

Tunçer, A. C., & Pamuk, S. (2014). Ottoman Empire: from 1830 to 1914. Bank of Greece, Bulgarian National Bank, National Bank of Romania, Oesterreichische National bank.

Umaru, A., Hamidu, A., & Musa, S. (2013). External debt and domestic debt impact on the growth of the Nigerian economy. International Journal of Educational Research, 1(2), 70-85.

Waheed, A. (2017). Determinants of external debt: A panel data analysis for oil & gas exporting and importing countries. International Journal of Economics and Financial Issues, 7(1), 234-240.

Zafar, S., & Butt, M. S. (2008). Impact of trade liberalization on external debt burden: Econometric evidence from Pakistan (MPRA paper No. 9548). Munich Personal RePEc Archive.

Zakaria, M. (2012). Interlinkages between openness and foreign debt in Pakistan. Doğuş Üniversitesi Dergisi, 13(1), 161-170.

World Development Indicators. (2016). World development indicators: The World Bank.