Sustainability of Fiscal Policy: An Empirical Examination for Turkish Economy

Abstract

Our paper aims to examine the sustainability of Turkish fiscal stance over the period 2006:1-2013:3. The long-run relationship between the tax revenues and the government expenditures are analyzed with regard to the framework of Hakkio and Rush (1991) by employing the bounds testing methodology of Pesaran, Shin and Smith (2001) which test the cointegration in terms of whether the series are I(0), I(1) or mutually cointegrated. To investigate the degree of fiscal sustainaibility, we estimate a long-run ARDL model. We find evidence of weak sustainability condition since the empirical results reveal the existence of cointegration relation though the long-run coefficient is found to be smaller than one.

Keywords

• Fiscal Balance,Fiscal Sustainability,Cointegration

References

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