ier International Econometric Review 1308-8793 1308-8815 Econometric Research Association 10.33818/ier.336791 Effect of Government Expenditure on GDP in the Turkish Economy Şimşek Esra İSTANBUL BİLGİ ÜNİVERSİTESİ Orhan Mehmet International Burch University Macit Fatih Northeast Normal University 10 04 2017 9 2 69 76 09 05 2017 09 29 2017 Copyright © 2009, International Econometric Review 2009 International Econometric Review

The objective of this article is to investigate theeffect of government expenditure on GDP in Turkey from 2000Q1-2015Q4 by thesuperexogeneity test. As a consequence of satisfying both conditions of weak exogeneity and structuralinvariance, government expenditure issuperexogenous to GDP which implies that the policy regime shift for theperiod of the Global Financial Crisis in Turkey did not cause structuralvariance in government expenditure. Indeed, the Lucas Critique which indicatesthat policy regime shifts cause structural breaks, appears to be refuted.

 Lucas Critique Government Expenditure Superexogeneity Test Ball, L., & Mazumder, S. (2015). A Phillips Curve with Anchored Expectations and Short-Term Unemployment. IMF Working Paper. https://doi.org/10.3386/w20715 Berlemann, M., & Wesselhöft, J.-E. (2014). Estimating aggregate capital stocks using the perpetual inventory method. Review of Economics, 65(1), 1–34. Castelnuovo, E. (2008). Regime shifts and the stability of backward-looking Phillips curves in open economies. Journal of International Money and Finance, 27(1), 40–53. https://doi.org/10.1016/j.jimonfin.2007.09.004 Davidson, J. E., Hendry, D., Srba, F., & Yeo, S. (1978). Econometric Modelling of the Aggregate Time-Series Relationship Between Consumers’ Expenditure and Income in the United Kingtom. The Economic Journal, 88, 661–692. Engle, R. F., & Hendry, D. F. (1993). Testing superexogeneity and invariance in regression models. Journal of Econometrics, 56(1–2), 119–139. https://doi.org/10.1016/0304-4076(93)90103-C Engle, R. F., Hendry, D. F., & Richard, J.-F. (1983). Exogeneity. Journal of Econometric Society, 277–304. Habibullah, M. S., Azali, M., & Baharumshah, A. Z. (2001). Money, income and the Lucas critique: the case for Malaysia. Analisis, 8(1&2), 69–85. Retrieved from http://repo.uum.edu.my/431/ Hurn, A. S., & Muscatelli, V. A. (1992). Testing Superexogeneity: the Demand for Broad Money in the Uk. Oxford Bulletin of Economics and Statistics, 54(4), 543–556. https://doi.org/10.1111/j.1468-0084.1992.mp54004004.x Karunaratne, N. D. (1996). Growth and trade dynamics under regime shifts in Australia. Journal of Economic Studies, 23(2), 55–69. Lindé, J. (2001). Testing for the Lucas critique: A quantitative investigation. American Economic Review, 91(4), 986–1005. Lucas, R. E. (1976). Econometric policy evaluation: A Critique. Carnegie-Rochester Conference Series on Public Policy, 1(1), 19–46. https://doi.org/10.1080/000368497327344 Montanaro, P. (2003). Lo stock di capitale pubblico: una stima per regione e per tipologia di bene. Rivista Economica Del Mezzogiorno, 17(3), 423–462. Rudebusch, G. (2005). Assessing the Lucas critique in monetary policy models. Journal of Money, Credit and Banking, 37(2), 245–72. https://doi.org/10.1353/mcb.2005.0024 Valadkhani, A. (1998). Effect of government capital expenditure on GDP in the Iranian economy using superexogeneity testing. Applied Economics Letters, 5(6), 361–364. https://doi.org/10.1080/135048598354726