SUSTAINABILITY OF FISCAL POLICY: ESTIMATING A FISCAL REACTION FUNCTION FOR TURKEY

Year 2018, , 0 - 0, 01.03.2018

Gülfer Vural

https://doi.org/10.17130/ijmeb.2018239936

Cited By: 1

Abstract

In this study a Fiscal policy analysis is used for Turkey between the periods 2006:12016:2 to assess the sustainability of fiscal policy. A fiscal reaction function is estimated to analyze the effects of public debt and fluctuations in GDP on the primary balance. The fiscal reaction function is obtained from the intertemporal government budget constraint in order to depict the behaviour of government towards the public debt. The results suggest that the primary budget balance reacts significantly to the previous increase in GDP gap

Keywords

Fiscal Policy, Debt Sustainability, Fiscal Reaction Function

SUSTAINABILITY OF FISCAL POLICY: ESTIMATING A FISCAL REACTION FUNCTION FOR TURKEY

Abstract

In this study a Fiscal policy analysis is used for Turkey between the periods 2006:1-2016:2 to assess the sustainability of fiscal policy. A fiscal reaction function is estimated to analyze the effects of public debt and fluctuations in GDP on the primary balance. The fiscal reaction function is obtained from the intertemporal government budget constraint in order to depict the behaviour of government towards the public debt. The results suggest that the primary budget balance reacts significantly to the previous increase in GDP gap.

Keywords

Maliye Politikası, Sürdürülebilir Borç, Mali Reaksiyon Fonksiyonu

References

• Alp, H., Başkaya, Y. S., Kılınç, M., & Yüksel, C. (2011). Estimating optimal Hodrick-Prescott Filter smoothing parameter for Turkey. İktisat, İşletme ve Finans, 26, 9-23.
• Anca, R. (2011). How to assess public debt sustainability: Empirical evidence for the advanced European countries. Romania Journal of Fiscal Policy, 2(2), 20-43.
• Azgün, S., & Taşdemir, M. (2006). Bütçe açıklarının sürdürülebilirliği: Zamanlararası borçlanma kısıtının testi (1980-2004). Atatürk Üniversitesi İİBF Dergisi, 20 (2), 35-47.
• Bohn, H. (1998). The Behaviour of U. S. Public Debt and Deficits. The Quarterly Journal of Economics, 113(3):949-963.
• Bohn, H. (2007). Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?. Journal of Monetary Economics, 54: 1837-1847.
• Budina N., & Wijnbergen S.V. (2009). Quantitative approaches to fiscal sustainability analysis: A case study of Turkey since the crisis of 2001. The World Bank Economic Review, 23(1), 119-140.
• Burger, P., Stuart, I., Jooste, C., & Cuevas, A. (2011). Fiscal sustainability and the fiscal reaction function for South Africa. IMF Working paper.
• Dalgiç, B., İyidoğan, P.V., & Balıkçıoğlu, E. (2014). Sustainability of Fiscal policy: An empirical examination for Turkish economy. Journal of Business Economics and Finance, 3, 13-137.
• D’Erasmo, P., Mendoza, E.G., & Zhang, J. (2015).What is a sustainable public debt? NBER Working Paper, No: 21574.
• De Mello, L. (2005). Estimating a fiscal reaction function: The case of debt sustainability in Brazil. OECD Economics Department Working Paper No. 423. OECD, Paris.
• Gali, J., & Perotti, R. (2003). Fiscal policy and monetary integration in Europe. CEPR Discussion Paper, No. 3933, Centre for Economic Policy Research, London.
• Hakkio, C., & Rush, M. (1991). Is the budget deficit too large?. Economic Inquiry, 29(3): 429- 446.
• Hamilton, J.D., & Flavin, M. A. (1986). On the limitations of government borrowing: A framework for empirical testing. American Economic Review, 808-816.
• Hepsağ, A. (2011). Mali politikaların sürdürülebilirliğinin yapısal kırılmalı periyodik birim kök testi ile analizi: Türkiye örneği. Doğuş Üniversitesi Dergisi, 12(1), 32-45.
• Kuştepeli, Y., & Önel, G. (2005). Fiscal deficit sustaianbility with a structural break: An application to Turkey. Review of Social, Economic and Business Studies, 5(6), 189-208.
• Mutuku, C. (2015). Assessing fiscal policy cyclicality and sustainability: A fiscal reaction function for Kenya. Journal of Economics Library, 2(3), 173-191.
• Quintos, C. (1995). Sustainability of the deficit process with structural shifts. Journal of Business & Economic Statistics, 13(4): 409-417.
• Stoica, T., & Leonte, A. (2011). Estimating a fiscal reaction function for Greece, International Conference on Financial Management and Economics IPEDR vol.11.
• Taylor, J. B. (2000). Reassessing discretionary fiscal policy. Journal of Economic Perspectives, 14(3), 21-36.
• Trehan, B., & Walsh, C. E. (1988). Common trends, intertemporal budget balance, and revenue smoothing. Journal of Economic Dynamics and Control, 12 (JuneSeptember), 425-444.