Measuring Türkiye's Fiscal Credibility and Transparency through Fiscal Balance and Debt Stock

Year 2025, Volume: 12 Issue: 1, 329 - 347, 31.03.2025

İbrahim Al , Gizem Akbulut Yıldız , Barış Yıldız

https://doi.org/10.30798/makuiibf.1565223

Abstract

Fiscal credibility and fiscal transparency affect many basic macroeconomic variables, especially economic growth, inflation and interest rates through expectations. Therefore, increasing credibility and transparency increase the effectiveness of fiscal policy by enabling better management of expectations. The aim of this study is to determine Türkiye’s fiscal credibility and transparency. For this purpose, Türkiye's fiscal credibility and transparency were measured for the 2010-2023 period with the help of various indices, based on the International Monetary Fund's fiscal balance and debt stock expectations. According to the findings, it is possible to say that fiscal credibility decreased in Türkiye, the absolute deviation between fiscal balance expectations and official targets increased, and fiscal transparency decreased, especially in the 2019-2022 period.

Keywords

Fiscal Credibility, Fiscal Transparency, Fiscal Opacity, Fiscal Balance, Debt Stock

Ethical Statement

Ethics Committee approval was not required for this study. The authors declare that the study was conducted in accordance with research and publication ethics. The authors declare that Artificial Intelligence (AI) tools were used solely to enhance spelling, grammar, and overall readability of the article. The authors declare that there are no financial conflicts of interest involving any institution, organization, or individual associated with this article. Additionally, there are no conflicts of interest among the authors. The authors affirm that they contributed equally to all aspects of the research.

References

• Andrade, P., Crump, R. K., Eusepi, S., & Moench, E. (2016). Fundamental disagreement. Journal of Monetary Economics, 83, 106–128. https://doi.org/10.1016/j.jmoneco.2016.08.007
• Anzoátegui-Zapata, J. C., & Galvis-Ciro, J. C. (2021). Effects of fiscal credibility on inflation expectations: Evidence from an emerging economy. Public Sector Economics, 45(1), 125–148. https://doi.org/10.3326/pse.45.1.4
• Arbatlı, E., & Escolano, J. (2015). Fiscal transparency, fiscal performance and credit ratings. Fiscal Studies, 36(2), 237–270. https://doi.org/10.1111/1475-5890.12051
• Atılgan-Yasa, A., Sanlısoy, S. & Ozen, A. (2020). Bütçe tutarlılığı ile politik istikrarsızlık ilişkisi: Türkiye’de 1984-2018 dönemi analizi. Sosyoekonomi, 28(44), 337-354. https://doi.org/10.17233/sosyoekonomi.2020.02.15
• Bağdigen, M. (2005). An empirical analysis of accurate budget forecasting in Turkey. Doğuş Üniversitesi Dergisi, 6(2), 190-201.
• Baxter, M. (1985). The role of expectations in stabilization policy. Journal of Monetary Economics, 15, 343–362. https://doi.org/10.1016/0304-3932(85)90021-2
• Blinder, A. S. (2000). Central-bank credibility: Why do we care? How do we build it? American Economic Review, 90(5), 1421–1431. https://doi.org/10.1257/aer.90.5.1421
• Clark, C. S. (2011). What is ‘credible’ fiscal policy? The Canadian experience, 1983–2010: The view of a former practitioner. In New directions for intelligent government in Canada: Papers in honour of Ian Stewart (pp. 101–126). Centre for the Study of Living Standards.
• Cukierman, A., & Meltzer, A. H. (1986). A theory of ambiguity, credibility, and inflation under discretion and asymmetric information. Econometrica, 54(5), 1099–1128. https://doi.org/10.2307/1912324
• de Mendonça, H. F., & Auel, G. E. (2016). The effect of monetary and fiscal credibility on public debt: Empirical evidence from the Brazilian economy. Applied Economics Letters, 23(11), 816–821. https://doi.org/10.1080/13504851.2015.1111980
• de Mendonça, H. F., & Baca, A. C. (2022). Fiscal opacity and reduction of income inequality through taxation: Effects on economic growth. The Quarterly Review of Economics and Finance, 83, 69-82. https://doi.org/10.1016/j.qref.2021.11.006
• de Mendonça, H. F., & Calafate, V. R. L. (2021). Lack of fiscal transparency and economic growth expectations: An empirical assessment from a large emerging economy. Empirical Economics, 61, 2985–3027. https://doi.org/10.1007/s00181-020-02000-4
• de Mendonça, H. F., & Machado, M. R. (2013). Public debt management and credibility: Evidence from an emerging economy. Economic Modelling, 30(1), 10–21. https://doi.org/10.1016/j.econmod.2012.09.009
• de Mendonça, H. F., & da Silva, R. (2016). Observing the influence of fiscal credibility on inflation: Evidence from an emerging economy. Economics Bulletin, 36(4), 2333–2349.
• de Mendonça, H. F., & Tostes, F. S. (2015). The effect of monetary and fiscal credibility on exchange rate pass-through in an emerging economy. Open Economies Review, 26(4), 787–816. https://doi.org/10.1007/s11079-014-9339-3
• de Mendonça, H. F., Vereda Oliveira, L., & Dias, M. I. S. (2024). The impact of fiscal opacity on business confidence: Empirical investigation from an emerging economy. Journal of Economic Studies. https://doi.org/10.1108/JES-01-2024-0007
• End, N. (2020). Rousseau's social contract or Machiavelli's virtue? A measure of fiscal credibility. AMSE Working Papers, 42, 1–56.
• End, N. (2023). Big brother is also being watched: Measuring fiscal credibility. Journal of Macroeconomics, 77, 103548, 1–14. https://doi.org/10.1016/j.jmacro.2023.103548
• End, N., & Hong, G. H. (2022). Trust what you hear: Policy communication, expectations, and fiscal credibility. IMF Working Papers, WP/22/36, 1–59.
• Frankel, J., & Schreger, J. (2013). Over-optimistic official forecasts and fiscal rules in the Eurozone. Review of World Economics, 149(2), 247–272.
• Gaol, S. L., Kuncoro, H., & Sebayang, K. D. (2015). The impact of fiscal credibility on the exchange rate. South East Asia Journal of Contemporary Business, Economics and Law, 8(3), 13–20.
• Hauner, D., Jonás, J., & Kumar, M. S. (2007). Policy credibility and sovereign credit: The case of the new EU member states. IMF Working Paper, WP/07/1, 1–29.
• Kasal, S. & Özpençe, Ö. (2020). A fiscal space analysis in terms of Turkey’s domestic debt. Sosyoekonomi, 28(43), 33-48.
• Kuncoro, H. (2017). Does the sustainable fiscal policy foster its credibility? Economic Journal of Emerging Markets, 9(1), 84–97. https://doi.org/10.20885/ejem.vol9.iss1.art9
• Lahiri, K., & Sheng, X. (2008). Evolution of forecast disagreement in a Bayesian learning model. Journal of Econometrics, 144, 325–340. https://doi.org/10.1016/j.jeconom.2008.02.002
• Mankiw, N. G., Reis, R., & Wolfers, J. (2003). Disagreement about inflation expectations. NBER Macroeconomics Annual, 18, 209–248. https://doi.org/10.1086/ma.18.3585256
• Montes, G. C., & Acar, T. (2018). Fiscal credibility and disagreement in expectations about inflation: Evidence for Brazil. Economics Bulletin, 38(2), 826–843.
• Montes, G. C., & Acar, T. (2020). Fiscal credibility, target revisions, and disagreement in expectations about fiscal results. The Quarterly Review of Economics and Finance, 76, 38–58. https://doi.org/10.1016/j.qref.2019.06.002
• Montes, G. C., & Luna, P. H. L. (2022). Do fiscal opacity, fiscal impulse, and fiscal credibility affect disagreement about economic growth forecasts? Empirical evidence from Brazil considering the period of political instability and presidential impeachment. Review of Development Economics, 26(4), 2356–2393. https://doi.org/10.1111/rode.12914
• Montes, G. C., de Oliveira, A. J., & Nicolay, R. (2019). Empirical evidence on the relation between fiscal credibility and central bank credibility: The Brazilian case. Estudos Economicos, 49(1), 105-129. https://doi.org/10.1590/0101-41614914gar
• Montes G. C., & Souza, I. (2020). Sovereign default risk, debt uncertainty and fiscal credibility: The case of Brazil, The North American Journal of Economics and Finance, 51, 100851, 1-26. https://doi.org/10.1016/j.najef.2018.09.009.
• Muth, J. F. (1961). Rational expectations and the theory of price movements. Econometrica, 29(3), 315–335. https://doi.org/10.2307/1909635
• Oliveira, L. V., & Curi, A. (2016). Disagreement in expectations and the credibility of monetary authorities in the Brazilian inflation targeting regime. EconomiA, 17, 56–76. https://doi.org/10.1016/j.econ.2016.03.002
• Patton, A. J., & Timmermann, A. (2010). Why do forecasters disagree? Lessons from the term structure of cross-sectional dispersion. Journal of Monetary Economics, 57, 803–820. https://doi.org/10.1016/j.jmoneco.2010.07.001
• Pıçak, S. (2022). Türkiye’de bütçe gider ve gelir tahminlerinin objektif doğruluk açısından değerlendirilmesi. Ekonomi İşletme ve Maliye Araştırmaları Dergisi, 4(2), 146-158. https://doi.org/10.38009/ekimad.1139292
• Wieland, V., & Wolters, M. (2011). The diversity of forecasts from macroeconomic models of the US economy. Econometric Theory, 47, 247–292. https://doi.org/10.1007/s00199-010-0549-7