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DETERMINANTS OF BUDGET DEFICIT UNCERTAINTY: EVIDENCE FROM DIFFERENCE AND SYSTEM GMM APPROACH

Year 2024, Volume: 38 Issue: 3, 712 - 727, 30.09.2024
https://doi.org/10.48070/erciyesakademi.1532392

Abstract

In this study, the effect of political, economic, and fiscal variables on budget deficit uncertainty is analyzed by using dynamic panel data methods, specifically difference and system Generalized Method of Moments (GMM), based on a dataset covering the period 1992-2016 for 48 countries. The aim of this study is to empirically examine the factors determining budget deficit uncertainty and analyze the causal relationship between this uncertainty, public expenditures, and public revenues. Main findings indicate that inflation positively affects budget deficit uncertainty, while economic growth has a negative impact. Public expenditures positively impact budget deficit uncertainty but negatively affect public revenues. However, when it comes to their effect on budget deficit uncertainty, public expenditures are found to outweigh the influence of public revenues. This result is supported by the finding that an increase in public debt corresponds with a rise in budget deficit uncertainty. Regarding the influence of political and institutional factors, it is observed that as political risk decreases, budget deficit uncertainty increases. This is explained by the increase in public expenditures and the deterioration of fiscal balance as the level of democracy rises. Causality tests reveal a bidirectional causality between public revenues and expenditures, and budget deficit uncertainty does not alter this outcome. Overall, the study concludes that careful planning of public revenues and expenditures, as well as cooperation among relevant institutions, plays a critical role in reducing budget deficit uncertainty.

References

  • Agnello, L., & Sousa, R. M. (2009). The determinants of public deficit volatility (No. Working Paper No.1042).
  • Allegret, J. P., Raymond, H., & Rharrabti, H. (2016). The impact of the eurozone crisis on European banks stocks, contagion, or interdependence. European Research Studies Journal, 19(1), 129-148.
  • Anwar, M., & Ahmad, M. (2012). Political determinants of budget deficit in Pakistan: An empirical investigation. (No. 135). HWWI Research Paper.
  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51.
  • Arif, A., & Hussain, M. (2018). Economic, political, and institutional determinants of budget deficits volatility: A panel data analysis. International Journal of Economics and Business Administration, 6(3), 98–114.
  • Barro, R. J. (1999). Determinants of democracy. Journal of Political economy, 107(S6), S158-S183.
  • Bayar, A., & Smeets, B. (2009). Economic, political and institutional determinants of budget deficits in the European Union (No. 2611). CESifo Group Munich.
  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
  • Boldeanu, T. F., & Tache, I. (2016). The financial system of the EU and the capital markets union. European Research Studies Journal, 2016(1), 59-70.
  • Brender, A., & Drazen, A. (2005). Political budget cycles in new versus established democracies. Journal of Monetary Economics, 52(7), 1271–1295.
  • Ezzat, A., & Hosni, R. (2018). Budget deficit volatility, institutional quality and macroeconomic performance. International Journal of Euro-Mediterranean Studies, 12(2), 21-40.
  • Javid, A., Arif, U., & Arif, A. (2011). Economic, political and institutional determinants of budget deficits volatility in selected Asian countries. The Pakistan Development Review, 50(4), 649–662.
  • Kiviet, J. F. (1995). On bias, inconsistency, and efficiency of various estimators in dynamic panel data models. Journal of Econometrics, 68(1), 53-78.
  • Mara, E.-R. (2012). Determinants of fiscal budget volatility in old versus new EU member states (No. 424555). MPRA Paper.
  • Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89(5), 914–927.
  • Muller, E. N. (1995). Economic determinants of democracy. American Sociological Review, 966-982.
  • Murwirapachena, G., Maredza, A., & Choga, I. (2013). The economic determinants of budget deficits in South Africa. Mediterranean Journal of Social Sciences, 4(13), 561–570.
  • Musgrave, R. A. (1966). Principles of budget determination. İçinde H. A. Cameron & W. Henderson (Eds.), Public finance: Selected readings (ss. 15–27). Random House.
  • Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica: Journal of The Econometric Society, 1417-1426.
  • Ngo, M. N., & Nguyen, L. D. (2020). The role of economics, politics and institutions on budget deficit in ASEAN countries. The Journal of Asian Finance, Economics and Business, 7(9), 251-261.
  • Pinho, M. M. (2008). The political economy of public spending composition: Evidence from a panel of OECD countries. FEP Working Papers 295.
  • Shi, M., & Svensson, J. (2006). Political budget cycles: Do they differ across countries and why? Journal of Public Economics, 90(8–9), 1367–1389.
  • Woo, J. (2003). Economic, political and institutional determinants of public deficits. Journal of Public Economics, 87(3–4), 387–426.
  • Yu, H. (2017). Impacts of the real effective exchange rate and the government deficit on aggregate output in Australia. Journal of Asian Finance, Economics and Business, 4(1), 19-23.

BÜTÇE AÇIĞI BELİRSİZLİĞİNİN BELİRLEYİCİLERİ: FARK VE SİSTEM GMM YAKLAŞIMINDAN ELDE EDİLEN KANITLAR

Year 2024, Volume: 38 Issue: 3, 712 - 727, 30.09.2024
https://doi.org/10.48070/erciyesakademi.1532392

Abstract

Bu çalışmada, 1992-2016 döneminde 48 ülke için politik, ekonomik ve mali değişkenlerin bütçe açığı belirsizliği üzerindeki etkisi dinamik panel veri yöntemi (fark ve sistem GMM) kullanılarak analiz edilmektedir. Çalışmanın amacı, bütçe açığı belirsizliğini belirleyen faktörleri ampirik olarak incelemek, bu belirsizlik ile kamu harcamaları ve kamu gelirleri arasındaki nedensellik ilişkisini analiz etmektir. Bulgular, enflasyonun bütçe açığı belirsizliğini pozitif yönde, ekonomik büyümeyi ise negatif yönde etkilediğini göstermektedir. Kamu harcamaları ise bütçe açığı belirsizliğini pozitif yönde, kamu gelirlerini negatif yönde etkilemektedir. Bütçe açığı belirsizliği üzerindeki etkisi açısından ise, kamu harcamalarının kamu gelirlerine baskın olduğu sonucuna ulaşılmaktadır. Bu sonuç, kamu borçluluğu arttıkça bütçe açığı belirsizliğinin de artması bulgusuyla desteklenmektedir. Politik ve kurumsal faktörlerin etkisi incelendiğinde, politik risk azaldıkça bütçe açığı belirsizliğinin arttığı görülmektedir. Bu durum, demokrasi seviyesinin artmasıyla kamu harcamalarının artması ve bütçe dengesinin bozulması ile açıklanmaktadır. Nedensellik testleri, kamu gelirleri ile harcamaları arasında çift yönlü bir nedensellik olduğunu ve bütçe açığı belirsizliğinin bu sonucu değiştirmediğini göstermektedir. Genel olarak, kamu gelir ve giderlerinin planlanması ve ilgili kurumların iş birliği yapmasının bütçe açığı belirsizliğini azaltmada önemli olduğu sonucuna varılmaktadır.

Ethical Statement

Bu makale, etik kurul izni gerektiren bir çalışma grubunda yer almamaktadır.

References

  • Agnello, L., & Sousa, R. M. (2009). The determinants of public deficit volatility (No. Working Paper No.1042).
  • Allegret, J. P., Raymond, H., & Rharrabti, H. (2016). The impact of the eurozone crisis on European banks stocks, contagion, or interdependence. European Research Studies Journal, 19(1), 129-148.
  • Anwar, M., & Ahmad, M. (2012). Political determinants of budget deficit in Pakistan: An empirical investigation. (No. 135). HWWI Research Paper.
  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.
  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51.
  • Arif, A., & Hussain, M. (2018). Economic, political, and institutional determinants of budget deficits volatility: A panel data analysis. International Journal of Economics and Business Administration, 6(3), 98–114.
  • Barro, R. J. (1999). Determinants of democracy. Journal of Political economy, 107(S6), S158-S183.
  • Bayar, A., & Smeets, B. (2009). Economic, political and institutional determinants of budget deficits in the European Union (No. 2611). CESifo Group Munich.
  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
  • Boldeanu, T. F., & Tache, I. (2016). The financial system of the EU and the capital markets union. European Research Studies Journal, 2016(1), 59-70.
  • Brender, A., & Drazen, A. (2005). Political budget cycles in new versus established democracies. Journal of Monetary Economics, 52(7), 1271–1295.
  • Ezzat, A., & Hosni, R. (2018). Budget deficit volatility, institutional quality and macroeconomic performance. International Journal of Euro-Mediterranean Studies, 12(2), 21-40.
  • Javid, A., Arif, U., & Arif, A. (2011). Economic, political and institutional determinants of budget deficits volatility in selected Asian countries. The Pakistan Development Review, 50(4), 649–662.
  • Kiviet, J. F. (1995). On bias, inconsistency, and efficiency of various estimators in dynamic panel data models. Journal of Econometrics, 68(1), 53-78.
  • Mara, E.-R. (2012). Determinants of fiscal budget volatility in old versus new EU member states (No. 424555). MPRA Paper.
  • Meltzer, A. H., & Richard, S. F. (1981). A rational theory of the size of government. Journal of Political Economy, 89(5), 914–927.
  • Muller, E. N. (1995). Economic determinants of democracy. American Sociological Review, 966-982.
  • Murwirapachena, G., Maredza, A., & Choga, I. (2013). The economic determinants of budget deficits in South Africa. Mediterranean Journal of Social Sciences, 4(13), 561–570.
  • Musgrave, R. A. (1966). Principles of budget determination. İçinde H. A. Cameron & W. Henderson (Eds.), Public finance: Selected readings (ss. 15–27). Random House.
  • Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica: Journal of The Econometric Society, 1417-1426.
  • Ngo, M. N., & Nguyen, L. D. (2020). The role of economics, politics and institutions on budget deficit in ASEAN countries. The Journal of Asian Finance, Economics and Business, 7(9), 251-261.
  • Pinho, M. M. (2008). The political economy of public spending composition: Evidence from a panel of OECD countries. FEP Working Papers 295.
  • Shi, M., & Svensson, J. (2006). Political budget cycles: Do they differ across countries and why? Journal of Public Economics, 90(8–9), 1367–1389.
  • Woo, J. (2003). Economic, political and institutional determinants of public deficits. Journal of Public Economics, 87(3–4), 387–426.
  • Yu, H. (2017). Impacts of the real effective exchange rate and the government deficit on aggregate output in Australia. Journal of Asian Finance, Economics and Business, 4(1), 19-23.
There are 25 citations in total.

Details

Primary Language Turkish
Subjects Policy of Treasury, Public Economy
Journal Section Articles
Authors

Gökhan Çobanoğulları 0000-0001-6634-1375

Serkan Erkam 0000-0002-8071-9650

Early Pub Date September 28, 2024
Publication Date September 30, 2024
Submission Date August 12, 2024
Acceptance Date September 18, 2024
Published in Issue Year 2024 Volume: 38 Issue: 3

Cite

APA Çobanoğulları, G., & Erkam, S. (2024). BÜTÇE AÇIĞI BELİRSİZLİĞİNİN BELİRLEYİCİLERİ: FARK VE SİSTEM GMM YAKLAŞIMINDAN ELDE EDİLEN KANITLAR. Erciyes Akademi, 38(3), 712-727. https://doi.org/10.48070/erciyesakademi.1532392

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