Effect of Government Expenditure on GDP in the Turkish Economy

Year 2017, , 69 - 76, 04.10.2017

Esra Şimşek , Mehmet Orhan Fatih Macit

https://doi.org/10.33818/ier.336791

Abstract

The objective of this article is to investigate the
effect of government expenditure on GDP in Turkey from 2000Q1-2015Q4 by the
superexogeneity test. As a consequence of satisfying both conditions of weak exogeneity and structural
invariance, government expenditure is 
superexogenous to GDP which implies that the policy regime shift for the
period of the Global Financial Crisis in Turkey did not cause structural
variance in government expenditure. Indeed, the Lucas Critique which indicates
that policy regime shifts cause structural breaks, appears to be refuted.

Keywords

Lucas Critique, Government Expenditure, Superexogeneity Test

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