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IS THE PUBLIC FINANCE DEFICIT A RISK ON INFLATION IN TURKEY?

Year 2023, Issue: C-iasoS 2022 Özel Sayısı, 1 - 10, 30.03.2023
https://doi.org/10.18092/ulikidince.1219713

Abstract

Price stability is the goal of economic policy. The policies implemented to achieve this goal can cause various problems such as financing the public deficit in economies. In this study, it is investigated whether public deficit financing has an impact on inflation in the period of 1975-2021 in Turkey. In the analysis, the financing of the public deficit is represented by the public sector borrowing requirement. Since the money to be released to the market due to the public sector borrowing requirement will affect the consumer price index, it has been chosen as the dependent variable. After the stationarity analysis of the series, the causality relationship between the series was investigated with the Toda-Yamamoto causality test. A relationship from inflation indicator to public deficit financing has been determined. The findings of the analysis for the period examined showed that, contrary to the widely accepted opinion in the literature, public deficit financing in Turkey did not cause an inflationary effect.

References

  • Abbas, A., Belhocine, N., El‐Ganainy, A. and Horton, M. (2011), Historical Patterns and Dynamics of Public Debt-Evidence from A New Database, IMF Economic Review, 59(4), 717–742.
  • Afonso, A. and Jalles, J.T. (2019), The Fiscal Consequences of Deflation: Evidence from The Golden Age of Globalization, The Quarterly Review of Economics and Finance, 74, 129–147.
  • Aghevli, B.B. and Khan, M.S. (1978), Government Deficits and The Inflationary Process in Developing Countries, IMF Staff Papers, 25(3), 383–416.
  • Aizenman, J. and Marion, N. (2011), Using Inflation to Erode the U.S. Public Debt, Journal of Macroeconomics, 33, 524–541.
  • Akçay, O.C., Alper, C.E., and Özmucur, S. (1996), Budget Deficit, Money Supply and Inflation: Evidence from Low and High Frequency Data for Turkey, Bogazici University Research Papers, 96(12), 1-12.
  • Akitoby, B., Binder, A., and Komatsuzaki, T. (2017), Inflation and Public Debt Reversals in The G7 Countries, Journal of Banking and Financial Economics, 1(7), 28-50.
  • Awokuse, T. O. (2003). Is The Export-Led Growth Hypothesis Valid for Canada? Canadian Journal of Economics, 36(1), 126-136.
  • Blanchard, O. (2019), Public Debt and Low Interest Rates, American Economic Review, 109(4), 1197–1229.
  • Catao, L.A.V. and Terrones, M.E. (2005), Fiscal Deficits and Inflation, Journal of Monetary Economics, 52, 529–554.
  • Cherif, R. and Hasanov, F. (2018), Public Debt Dynamics: The Effects of Austerity, Inflation, and Growth Shocks, Empirical Economics, 54, 1087–1105.
  • Çakmak, U., and Gökçe, A. (2018), Türkiye Ekonomisinde Enflasyon ve Kamu Sektörü Açığı Arasındaki Dinamik İlişkiler ve Makro-Ekonomik Yansımaları 1975-2016, Siyaset, Ekonomi ve Yönetim Araştırmaları Dergisi, 6(1), 73-89.
  • Demir, M. and Sever, E. (2008), The Effects of Public Domestic Debt on The Rate of Growth, Interest and Inflation, Electronic Journal of Social Sciences, 7(25), 170-196.
  • End, N., Tapsoba, S.J.A., Terrier, G. and Duplay, R. (2015), Deflation and Public Finances: Evidence from The Historical Records, IMF Working Paper, WP/15/176.
  • Equiza‐Goñi, J. (2016), Government Debt Maturity and Debt Dynamics in Euro Area Countries. Journal of Macroeconomics, 49, 292–311.
  • Fukunaga, I., Komatsuzaki, T., and Matsuoka, H. (2022), Inflation and Public Debt Reversals in Advanced Economies. Contemporary Economic Policy, 40(1), 124-137.
  • Giannitsarou, C. and Scott, A. (2008), Inflation Implications of Rising Government Debt. NBER International Seminar on Macroeconomics 2006, 393–442.
  • Günaydın, İ. (2001), Public Sector Deficits and Inflation in Turkey. Economics, Business and Finance, 16(181), 62-77. Hall, G.J. and Sargent, T.J. (2011), Interest Rate Risk and Other Determinants of Post‐WWII U.S. Government Debt/GDP Dynamics, American Economic Journal: Macroeconomics, 3, 192-214.
  • Heller, P.S. (1980), Impact of inflation on fiscal policy in developing countries, Staff Papers, 27(4), 712-748.
  • Hilscher, J., Raviv, A. and Reis, R. (2020), Inflating away The Public Debt? An Empirical Assessment’, available at https://hilscher.ucdavis.edu/201125_inflatingdebt-appendix.pdf (Accessed 10/02/2022).
  • Krause, M.U. and Moyen, S. (2016), Public Debt and Changing Inflation Targets. American Economic Journal: Macroeconomics, 8(4), 142–176.
  • Lee, J., and Strazicich, M.C. (2003). Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks. The Review of Economics and Statistics, 85(4), 1082-1089.
  • Lee, J., and Strazicich, M.C. (2004). Minimum LM Unit Root Test with One Structural Break. Appalachian State University Working Papers, 4(17), 1-15.
  • Mavrotas, G. and Kelly, R. (2001). Old Wine in New Bottle: Testing Causality Between Savings and Growth. The Manchester School Supplement, 1463-6786, 97–105.
  • Oktayer, A. (2010), Budget Deficits, Monetary Growth and Inflation Relationship in Turkey. Journal of Fiscal, 158(1), 431-447.
  • Olivera, J.G.H. (1967), Money, Prices and Fiscal Lags: A Note on The Dynamics of Inflation, Quarterly Review della Banca Nazionale del Lavoro, 20, 258-267.
  • Özgün, B.D. (2000), An Empirical Approach to Fiscal Deficits and Inflation: Evidence From Turkey, The Undersecretariat of Treasury General Directorate of Economic Research Working Papers, 1-28.
  • Reinhart, C.M. (2012), The Return of Financial Repression, Financial Stability Review, 16, 37-48.
  • Reinhart, C.M. and Sbrancia, M.B. (2015), The Liquidation of Government Debt, Economic Policy, 30(82), 291-333.
  • Rogoff, K. (2013), Inflation is still a Lesser Evil, available at https://www.project-syndicate.org/commentary/the-benefits-of-higher-inflation-by-kenneth-rogoff. (Accessed 10/02/2022).
  • Sağlam, M. and Uğurlu, E. (2013), Public Deficits, Money Growth and Inflation: Turkey Case (1983-2008), Financial, Political and Economic Comments, 50(576), 71-84.
  • Sims, C. (2016), Fiscal Policy, Monetary Policy and Central Bank Independence, available at http://sims.princeton.edu/yftp/JacksonHole16/JHpaper.pdf. (Accessed 10/02/2022).
  • Tanzi, V. (1977), Inflation, Lags in Collection, and The Real Value of Tax Revenue, IMF Staff Papers, 24, 154-167. Turkish Statistical Institute, (2021). https://data.tuik.gov.tr/
  • Ulusoy, A. and Erdem, H.F. (2014), The Interaction of Domestic Debt and Inflation: The Case of Turkey, Journal of Management and Economics Studies, 12(22), 122-135.
  • World Bank, (2021). https://data.worldbank.org/

TÜRKİYE'DE KAMU AÇIĞI FİNANSMANI ENFLASYON ÜZERİNDE RİSK MİDİR?

Year 2023, Issue: C-iasoS 2022 Özel Sayısı, 1 - 10, 30.03.2023
https://doi.org/10.18092/ulikidince.1219713

Abstract

Fiyat istikrarı, ekonomi politikasının amacıdır. Bu amaca ulaşmak için uygulanan politikalar ekonomilerde kamu açığı finansmanı gibi çeşitli sorunlara yol açabilmektedir. Kamu açığının finansmanı GSYH'den yapıldığı için finansman değerinin GSYİH'ya oranı önemlidir. Bu çalışmada Türkiye’de 1975-2021 döneminde kamu açığı finansmanının enflasyona etki edip etmediği araştırılmaktadır. Bu amaçla yapılacak analizde kamu açığının finansmanı kamu kesimi borçlanma gereği ile temsil edilmektedir ve GSYİH içindeki payı ekonometrik değişken olarak kabul edilmektedir. Ayrıca kamu kesiminin borçlanma gereği nedeniyle piyasaya çıkacak paranın öncelikle tüketici fiyat endeksini etkileyeceği düşünülmüştür. Analizde bağımlı değişken olarak kabul edilen enflasyon göstergesi TÜFE ile temsil edilmektedir. Değişken serilerinin durağanlığı incelendikten sonra Toda-Yamamoto nedensellik testi ile seriler arasındaki nedensellik ilişkisi araştırılmıştır. Araştırma sonucunda enflasyon göstergesinden kamu açığı finansmanına doğru bir ilişki tespit edilmiştir. İncelenen döneme ilişkin analiz bulguları, literatürde yaygın olarak kabul edilen görüşün aksine Türkiye'de kamu açığı finansmanının enflasyonist bir etkiye yol açmadığını göstermiştir.

References

  • Abbas, A., Belhocine, N., El‐Ganainy, A. and Horton, M. (2011), Historical Patterns and Dynamics of Public Debt-Evidence from A New Database, IMF Economic Review, 59(4), 717–742.
  • Afonso, A. and Jalles, J.T. (2019), The Fiscal Consequences of Deflation: Evidence from The Golden Age of Globalization, The Quarterly Review of Economics and Finance, 74, 129–147.
  • Aghevli, B.B. and Khan, M.S. (1978), Government Deficits and The Inflationary Process in Developing Countries, IMF Staff Papers, 25(3), 383–416.
  • Aizenman, J. and Marion, N. (2011), Using Inflation to Erode the U.S. Public Debt, Journal of Macroeconomics, 33, 524–541.
  • Akçay, O.C., Alper, C.E., and Özmucur, S. (1996), Budget Deficit, Money Supply and Inflation: Evidence from Low and High Frequency Data for Turkey, Bogazici University Research Papers, 96(12), 1-12.
  • Akitoby, B., Binder, A., and Komatsuzaki, T. (2017), Inflation and Public Debt Reversals in The G7 Countries, Journal of Banking and Financial Economics, 1(7), 28-50.
  • Awokuse, T. O. (2003). Is The Export-Led Growth Hypothesis Valid for Canada? Canadian Journal of Economics, 36(1), 126-136.
  • Blanchard, O. (2019), Public Debt and Low Interest Rates, American Economic Review, 109(4), 1197–1229.
  • Catao, L.A.V. and Terrones, M.E. (2005), Fiscal Deficits and Inflation, Journal of Monetary Economics, 52, 529–554.
  • Cherif, R. and Hasanov, F. (2018), Public Debt Dynamics: The Effects of Austerity, Inflation, and Growth Shocks, Empirical Economics, 54, 1087–1105.
  • Çakmak, U., and Gökçe, A. (2018), Türkiye Ekonomisinde Enflasyon ve Kamu Sektörü Açığı Arasındaki Dinamik İlişkiler ve Makro-Ekonomik Yansımaları 1975-2016, Siyaset, Ekonomi ve Yönetim Araştırmaları Dergisi, 6(1), 73-89.
  • Demir, M. and Sever, E. (2008), The Effects of Public Domestic Debt on The Rate of Growth, Interest and Inflation, Electronic Journal of Social Sciences, 7(25), 170-196.
  • End, N., Tapsoba, S.J.A., Terrier, G. and Duplay, R. (2015), Deflation and Public Finances: Evidence from The Historical Records, IMF Working Paper, WP/15/176.
  • Equiza‐Goñi, J. (2016), Government Debt Maturity and Debt Dynamics in Euro Area Countries. Journal of Macroeconomics, 49, 292–311.
  • Fukunaga, I., Komatsuzaki, T., and Matsuoka, H. (2022), Inflation and Public Debt Reversals in Advanced Economies. Contemporary Economic Policy, 40(1), 124-137.
  • Giannitsarou, C. and Scott, A. (2008), Inflation Implications of Rising Government Debt. NBER International Seminar on Macroeconomics 2006, 393–442.
  • Günaydın, İ. (2001), Public Sector Deficits and Inflation in Turkey. Economics, Business and Finance, 16(181), 62-77. Hall, G.J. and Sargent, T.J. (2011), Interest Rate Risk and Other Determinants of Post‐WWII U.S. Government Debt/GDP Dynamics, American Economic Journal: Macroeconomics, 3, 192-214.
  • Heller, P.S. (1980), Impact of inflation on fiscal policy in developing countries, Staff Papers, 27(4), 712-748.
  • Hilscher, J., Raviv, A. and Reis, R. (2020), Inflating away The Public Debt? An Empirical Assessment’, available at https://hilscher.ucdavis.edu/201125_inflatingdebt-appendix.pdf (Accessed 10/02/2022).
  • Krause, M.U. and Moyen, S. (2016), Public Debt and Changing Inflation Targets. American Economic Journal: Macroeconomics, 8(4), 142–176.
  • Lee, J., and Strazicich, M.C. (2003). Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks. The Review of Economics and Statistics, 85(4), 1082-1089.
  • Lee, J., and Strazicich, M.C. (2004). Minimum LM Unit Root Test with One Structural Break. Appalachian State University Working Papers, 4(17), 1-15.
  • Mavrotas, G. and Kelly, R. (2001). Old Wine in New Bottle: Testing Causality Between Savings and Growth. The Manchester School Supplement, 1463-6786, 97–105.
  • Oktayer, A. (2010), Budget Deficits, Monetary Growth and Inflation Relationship in Turkey. Journal of Fiscal, 158(1), 431-447.
  • Olivera, J.G.H. (1967), Money, Prices and Fiscal Lags: A Note on The Dynamics of Inflation, Quarterly Review della Banca Nazionale del Lavoro, 20, 258-267.
  • Özgün, B.D. (2000), An Empirical Approach to Fiscal Deficits and Inflation: Evidence From Turkey, The Undersecretariat of Treasury General Directorate of Economic Research Working Papers, 1-28.
  • Reinhart, C.M. (2012), The Return of Financial Repression, Financial Stability Review, 16, 37-48.
  • Reinhart, C.M. and Sbrancia, M.B. (2015), The Liquidation of Government Debt, Economic Policy, 30(82), 291-333.
  • Rogoff, K. (2013), Inflation is still a Lesser Evil, available at https://www.project-syndicate.org/commentary/the-benefits-of-higher-inflation-by-kenneth-rogoff. (Accessed 10/02/2022).
  • Sağlam, M. and Uğurlu, E. (2013), Public Deficits, Money Growth and Inflation: Turkey Case (1983-2008), Financial, Political and Economic Comments, 50(576), 71-84.
  • Sims, C. (2016), Fiscal Policy, Monetary Policy and Central Bank Independence, available at http://sims.princeton.edu/yftp/JacksonHole16/JHpaper.pdf. (Accessed 10/02/2022).
  • Tanzi, V. (1977), Inflation, Lags in Collection, and The Real Value of Tax Revenue, IMF Staff Papers, 24, 154-167. Turkish Statistical Institute, (2021). https://data.tuik.gov.tr/
  • Ulusoy, A. and Erdem, H.F. (2014), The Interaction of Domestic Debt and Inflation: The Case of Turkey, Journal of Management and Economics Studies, 12(22), 122-135.
  • World Bank, (2021). https://data.worldbank.org/
There are 34 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Huriye Gonca Diler 0000-0002-9937-1324

Publication Date March 30, 2023
Published in Issue Year 2023 Issue: C-iasoS 2022 Özel Sayısı

Cite

APA Diler, H. G. (2023). IS THE PUBLIC FINANCE DEFICIT A RISK ON INFLATION IN TURKEY?. Uluslararası İktisadi Ve İdari İncelemeler Dergisi(C-iasoS 2022 Özel Sayısı), 1-10. https://doi.org/10.18092/ulikidince.1219713

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