Prof. Dr. Fatih Özatay Presented His Recent Study at the TOBB ETÜ Economics Seminar Series

Prof. Dr. Fatih Özatay, a faculty member of the TOBB ETÜ Department of Economics and one of Türkiye’s leading economists, discussed the relationship between external debt sustainability, risk premium and economic growth as part of the Department’s seminar series. Held on Friday, 19 June 2026, in the 2nd Floor Meeting Room, the seminar featured Prof. Dr. Özatay’s study titled “Risk Premium and External Debt Sustainability: Thirlwall’s Law and a Stock-Flow Consistent Model for a Small Globalized Developing Economy.”

In his study, Prof. Dr. Özatay presented a framework that extends Thirlwall’s Law, one of the central references in the balance-of-payments-constrained growth literature, by incorporating external debt, foreign reserves, foreign borrowing costs and risk premiums. He also examined, through a stock-flow consistent model, the macroeconomic consequences of a sudden decline in risk-taking behavior in global financial centers for highly indebted economies.

The seminar highlighted that models based on a fixed interest rate assumption may fail to capture important vulnerabilities related to external debt sustainability. By contrast, when risk premiums increase with the level of external debt, sharper threshold effects may arise for growth, exchange rate dynamics and borrowing capacity. Prof. Dr. Özatay underlined that high external debt ratios can create serious fragilities, particularly during episodes of sudden capital outflows and global risk aversion.

Following the presentation, participants raised questions and exchanged views on external debt sustainability, exchange rate policy, risk premiums and policy design in developing economies. The seminar concluded as a productive academic discussion linking current macroeconomic challenges with theoretical and model-based analysis