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Appraising the Fiscal Sustainability in a Welfare State: Evidence from Turkey

Year 2019, Volume: 4 Issue: 2, 1 - 22, 18.10.2019

Abstract

According to Tanzi and Schuknecht (1997), the welfare states are characterized by large
and ever-mounting fiscal deficits and public debt. Due to their shallow fiscal spaces, the
developing countries jeopardize their fiscal stability once they opt for running welfare state
policies. This study gauges the degree of fiscal vulnerability in Turkey from a welfare state
perspective and aims to appraise the posture of fiscal stability under welfare state policies
by means of fiscal fragility index and causality analyses. Overall, the results indicate that
despite exhibiting welfare state characteristics, Turkey’s fiscal stance does not reveal high
levels of fragility. The analysis of the fiscal fragility index indicates that the level of fiscal
vulnerability is time-varying and during the 90s surges in the social expenditures coexist
with rising fiscal vulnerability, whereas during 2000s, the despite considerable upward movements
in social spending, the index value does not imply a deterioration in fiscal fragility
apparently thanks to prudential policies during the period. Also, causality test results reveal
that there is unidirectional causality from required primary balance to real primary balance
indicating that the primary balance is used actively to restore fiscal stability. Nevertheless,
in recent years, the index value exhibits a rising trend signalling a worsening fiscal posture
which might entail an overhaul for the welfare state policies.

References

  • Afonso A., Jalles T. J. (2016) The elusive character of fiscal sustainability, Applied Economics, 48:28, 2651-2664, DOI: 10.1080/00036846.2015.1128074
  • Argitis, G., & Nikolaidi, M. (2014). The financial fragility and the crisis of the Greek government sector. International Review of Applied Economics, 28(3), 274-292. doi: 10.1080/02692171.2013.858667
  • Baldacci, E., McHugh, J., & Petrova, I. K. (2011B). Measuring Fiscal Vulnerability and Fiscal Stress: A Proposed Set of Indicators. IMF Working Papers, 1-20.
  • Baldacci, E., Petrova, I. K., Belhocine, N., Dobrescu, G., & Mazraani, S. (2011A). Assessing fiscal stress. IMF Working Papers, 1-41.
  • Financial Programming and Policies Volume I IMF Institute for Capacity Development.
  • Herrera-Ramos, María d.C.; Prats, María A. 2020. "Fiscal Sustainability in the European Countries: A Panel ARDL Approach and a Dynamic Panel Threshold Model" Sustainability 12, no. 20: 8505. https://doi.org/10.3390/su12208505
  • Karlsson, Hyunjoo Kim (2020) Investigation of the time-dependent dynamics between government revenue and expenditure in China: a wavelet approach ,Journal of the Asia Pacific Economy, 25:2, 250-269, DOI: 10.1080/13547860.2019.1646573
  • Nikolaidi, M. (2014). Essays on Financial Fragility, Instability and Macroeconomy. (Doctoral dissertation). Athens: National and Kapodistrian University of Athens.
  • Rodriguez Alexis-Cruz. (2014) Is There a Relationship between Fiscal Sustainability and Currency Crises? International Evidence Based on Causality Tests International Journal of Economic Sciences and Applied Research, 7 (1): 69-87.
  • Shevchuk, V., & Kopych, R. (2018). Assessing the Fiscal Sustainability in Ukraine: TVP and VAR/VEC approaches. Entrepreneurial Business and Economics Review, 6(3), 73-87. https://doi.org/10.15678/EBER.2018.060305
  • Stoian, A. (2011). A Simple Public Debt Dynamic Model for Assessing Fiscal Vulnerability: Empirical Evidence for EU Countries. Research in Applied Economics, 3(2), E3. doi:10.5296/rae.v3i2.1137.
  • Stoian, A. (2012)a. How vulnerable is fiscal policy in Central and Eastern European countries ?. Romanian Journal of Fiscal Policy (RJFP), 3(2), 68-81.
  • Stoian, A. (2012)b. Fiscal Sustainability in European Welfare State: Evidence from Cumulative Excess of the Primary Balance, Centro De Investigação Em Gestão E Economia Working Papers N. 27
  • Stoian, A., Obreja Brașoveanu, L., Brașoveanu, I. V., & Dumitrescu, B. (2018). A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries. Sustainability, 10(7), 2482. doi: http://dx.doi.org/10.3390/su10072482
  • Stoian, A., Obreja Brașoveanu, L., Dumitrescu, B., & Brașoveanu, I. (2015). A new framework for detecting the short-term fiscal vulnerability for the European Union countries (No. 63537). University Library of Munich, Germany.
  • Toda H. Y., Taku Yamamoto Statistical inference in vector autoregressions with possibly integrated processes Journal of Econometrics Volume 66, Issues 1–2, March–April 1995, Pages 225-250
  • Terra, F. H. B., & Ferrari-Filho, F. (2020). Public Sector Financial Fragility Index: an analysis of the Brazilian federal government from 2000 to 2016. Journal of Post Keynesian Economics, 1-25. doi: 10.1080/01603477.2020.1713006
  • Zarei, Z. (2018) Cross Effect between Fiscal Sustainability and Financial Stability in Iran Monetary and Banking Research Institute Central Bank of the Islamic Republic of Iran MBRI PP- 97005

Sosyal Devlette Mali Sürdürülebilirliğe Dair Bir Değerlendirme: Türkiye Örneği

Year 2019, Volume: 4 Issue: 2, 1 - 22, 18.10.2019

Abstract

Tanzi ve Schuknecht’e (1997) göre refah devletlerinin karakteristik özellikleri arasında büyük ve sürekli artan mali açıklar ve kamu borcu yer alır ancak bu ülkeler sınırlı mali alanları nedeniyle refah devleti politikaları yürüttüklerinde bir yandan da mali istikrarlarını
tehlikeye atarlar ve mali kırılganlıkla karşılaşırlar. Bu çalışma, refah devleti perspektifinden
Türkiye’de mali kırılganlığın derecesini ölçmekte ve mali kırılganlık endeksi ve nedensellik
analizleri yoluyla refah devleti politikaları çerçevesinde mali istikrarın durumunu değerlendirmeyi
amaçlamaktadır. Genel olarak, sonuçlar refah devleti özellikleri sergilemesine
rağmen Türkiye’nin mali duruşunun yüksek düzeyde kırılganlık göstermediğini göstermektedir.
Mali kırılganlık endeksinin analizi, mali kırılganlık seviyesinin zamana göre değiştiğini
ve 90’lı yıllarda sosyal harcamalardaki artışların artan mali kırılganlık ile birlikte
var olduğunu, 2000’li yıllarda ise sosyal harcamalardaki önemli artış hareketlerine rağmen
endeks değerinin arttığını göstermektedir bu da söz konusu dönemde ihtiyatlı politikalar
sayesinde mali kırılganlıkta bir bozulma gerçekleşmediği anlamına gelmektedir. Ayrıca nedensellik
testi sonuçları, faiz dışı dengenin mali istikrarı sağlamak için aktif olarak kullanıldığını
ve borcu stabilize eden faiz dışı dengeden reel faiz dışı dengeye doğru tek yönlü bir
nedensellik olduğunu ortaya koymaktadır. Bu da hükümetin gerektiğinde faiz dışı fazlayı
bir dengeleyici enstrüman olarak kullandığını göstermektedir. Bununla birlikte, son yıllarda,
mali kırılganlık endeksi değeri, refah devleti politikalarının revizyonunu gerektirebilecek
kötüleşen bir mali durum sinyali veren bir yükseliş eğilimi sergilemektedir.

References

  • Afonso A., Jalles T. J. (2016) The elusive character of fiscal sustainability, Applied Economics, 48:28, 2651-2664, DOI: 10.1080/00036846.2015.1128074
  • Argitis, G., & Nikolaidi, M. (2014). The financial fragility and the crisis of the Greek government sector. International Review of Applied Economics, 28(3), 274-292. doi: 10.1080/02692171.2013.858667
  • Baldacci, E., McHugh, J., & Petrova, I. K. (2011B). Measuring Fiscal Vulnerability and Fiscal Stress: A Proposed Set of Indicators. IMF Working Papers, 1-20.
  • Baldacci, E., Petrova, I. K., Belhocine, N., Dobrescu, G., & Mazraani, S. (2011A). Assessing fiscal stress. IMF Working Papers, 1-41.
  • Financial Programming and Policies Volume I IMF Institute for Capacity Development.
  • Herrera-Ramos, María d.C.; Prats, María A. 2020. "Fiscal Sustainability in the European Countries: A Panel ARDL Approach and a Dynamic Panel Threshold Model" Sustainability 12, no. 20: 8505. https://doi.org/10.3390/su12208505
  • Karlsson, Hyunjoo Kim (2020) Investigation of the time-dependent dynamics between government revenue and expenditure in China: a wavelet approach ,Journal of the Asia Pacific Economy, 25:2, 250-269, DOI: 10.1080/13547860.2019.1646573
  • Nikolaidi, M. (2014). Essays on Financial Fragility, Instability and Macroeconomy. (Doctoral dissertation). Athens: National and Kapodistrian University of Athens.
  • Rodriguez Alexis-Cruz. (2014) Is There a Relationship between Fiscal Sustainability and Currency Crises? International Evidence Based on Causality Tests International Journal of Economic Sciences and Applied Research, 7 (1): 69-87.
  • Shevchuk, V., & Kopych, R. (2018). Assessing the Fiscal Sustainability in Ukraine: TVP and VAR/VEC approaches. Entrepreneurial Business and Economics Review, 6(3), 73-87. https://doi.org/10.15678/EBER.2018.060305
  • Stoian, A. (2011). A Simple Public Debt Dynamic Model for Assessing Fiscal Vulnerability: Empirical Evidence for EU Countries. Research in Applied Economics, 3(2), E3. doi:10.5296/rae.v3i2.1137.
  • Stoian, A. (2012)a. How vulnerable is fiscal policy in Central and Eastern European countries ?. Romanian Journal of Fiscal Policy (RJFP), 3(2), 68-81.
  • Stoian, A. (2012)b. Fiscal Sustainability in European Welfare State: Evidence from Cumulative Excess of the Primary Balance, Centro De Investigação Em Gestão E Economia Working Papers N. 27
  • Stoian, A., Obreja Brașoveanu, L., Brașoveanu, I. V., & Dumitrescu, B. (2018). A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries. Sustainability, 10(7), 2482. doi: http://dx.doi.org/10.3390/su10072482
  • Stoian, A., Obreja Brașoveanu, L., Dumitrescu, B., & Brașoveanu, I. (2015). A new framework for detecting the short-term fiscal vulnerability for the European Union countries (No. 63537). University Library of Munich, Germany.
  • Toda H. Y., Taku Yamamoto Statistical inference in vector autoregressions with possibly integrated processes Journal of Econometrics Volume 66, Issues 1–2, March–April 1995, Pages 225-250
  • Terra, F. H. B., & Ferrari-Filho, F. (2020). Public Sector Financial Fragility Index: an analysis of the Brazilian federal government from 2000 to 2016. Journal of Post Keynesian Economics, 1-25. doi: 10.1080/01603477.2020.1713006
  • Zarei, Z. (2018) Cross Effect between Fiscal Sustainability and Financial Stability in Iran Monetary and Banking Research Institute Central Bank of the Islamic Republic of Iran MBRI PP- 97005
There are 18 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Cansın Kemal Can

Publication Date October 18, 2019
Published in Issue Year 2019 Volume: 4 Issue: 2

Cite

APA Can, C. K. (2019). Appraising the Fiscal Sustainability in a Welfare State: Evidence from Turkey. Siyasal Bilgiler Fakültesi Dergisi, 4(2), 1-22.