In countries where the government is the major recipient of bank lending, public debt is likely to harm financial development. Moreover, the lower the financial depth, the greater the adverse effects of public borrowing on financial development and macroeconomic outcomes.

This study investigates the empirical relationship(s) between macroeconomic instability, public and private capital accumulation and growth in Turkey over the period 1963-1999. Time series econometric techniques, such as cointegration and impulse response analysis, are used. The results of this...