The stability of fiscal policies is of great importance in achieving macroeconomic targets. The stability of fiscal policies brings the concept of fiscal sustainability to the forefront. Sustainability is the use of existing resources in an economy without excessive destruction, considering the welfare of future generations. The notion of sustainability, which dates back to 1713, was first used in areas such as forestry and agriculture and emerged as a concept that includes the concern for protecting natural resources for the future. In the following period, sustainability became a concept applied in almost every field. This concept has become an area of interest, especially with respect to sustainable development, which was brought to the agenda in the Our Common Future Report published by the World Commission on Environment and Development in 1987. Sustainability has three separate dimensions: economic, social and environmental. In economic terms, sustainability provides the highest continuity of social welfare for an extended period, even an indefinite period. The concept of sustainability in the fiscal field has been reflected in fiscal sustainability. The main objectives of countries’ fiscal policies include increasing growth and development. However, especially in developing countries, fiscal policy can positively or negatively affect future generations depending on how public revenue is collected and spent. For such reasons, the concept of fiscal sustainability is gaining importance. Fiscal sustainability, which can be defined in many ways, often expresses the level at which a state’s fiscal policies are sustainable. Fiscal sustainability is closely related to the state’s solvency in a country. The state’s solvency is related to its budget deficits and debt burden. Accordingly, the state’s ability to finance public expenditures with public revenues and the sustainability of public debts are a country’s most important fiscal sustainability indicators. The existence of f iscal sustainability in a country can be investigated using two different methods. The first is the accounting approach, in which fiscal sustainability is analysed with economic indicators, as pioneered by Buiter (1985). This approach analyzes fiscal sustainability by considering a country’s economic indicators. The second is the budget constraint approach, in which fiscal sustainability is measured through econometric methods pioneered by Hamilton and Flavin (1986). The existence of fiscal sustainability is investigated using several econometric analyses, such as the unit root test or co-integration test. With these approaches, determining whether current policies are sustainable is essential for policymakers. Determining this later reveals that there are policies that need to be corrected.

The increase in the public debt burden in almost every country, along with the global economic crisis that emerged in 2008, has made the concept of fiscal sustainability gain importance. In addition, the importance given to fiscal discipline by international organisations has made countries must implement more stable fiscal policies. Countries have simultaneously implemented monetary and fiscal policies to reduce both the public debt burden and budget deficits. In Türkiye, a country with budget deficits and debt problems for many years, its relations with the IMF, the World Bank, and the EU membership process have brought the concept of fiscal sustainability to the forefront. In particular, the economic crises experienced in 2001 and 2008, the exchange rate crisis that started in 2018 and the COVID-19 outbreak in 2019havecausedthebudgetdeficitstoincreaseinTürkiye. Theincreaseinbudgetdeficitshasalsoincreased the need for borrowing. Thesustainability of both budget deficits and debts has been negatively affected. In this context, the study determines fiscal sustainability in Türkiye between 2020 and 2023, and the NARDL method has been used. The study investigated the determination of fiscal sustainability based on the literature studies and two separate models. When the literature on fiscal sustainability was examined, it was observed that fiscal sustainability in a country was investigated through budget deficits or public debt stock. In the first model established based on these studies, public revenues were considered the dependent variable, public expenditures were the independent variable, and fiscal sustainability was investigated based on budget deficits. In the second model, the budget balance was considered the dependent variable, public debt stock was the independent variable, and fiscal sustainability was investigated based on the debt burden. The NARDLmethodusedin the study considers the asymmetric effects of the variables. Asymmetric information that mayarise in the market affect the public revenues and expenditures. In addition, this method allows fiscal sustainability in Türkiye to be investigated by considering the negative and positive effects of the variables. Thus, the negative and positive impact of the independent variables on the dependent variable can also be evaluated separately. In addition, the NARDL method also allows the measurement of the co-integration relationship between stationary variables at different levels. Due to such advantages, this method was preferred in the study, and it is expected that the study will differ from the studies in the literature and contribute to the relevant field.

In the study, whether there is a co-integration relationship between the variables between the years 2000-2023 was investigated with the NARDL co-integration test. The co-integration relationship between the variables is interpreted as the existence of fiscal sustainability. The values of the coefficients of the variables show the degree of fiscal sustainability. However, in time series analyses, it is important to test the stationarity of the variables before applying the co-integration analysis. The stationarity of the variables is tested with unit root tests. Through these tests, it is determined whether the time series are stationary or not or whether they are stationary at the level of their differences.

 In models with non-stationary series, the residuals are not stationary unless the variables are co-integrated. Classical estimation methods give errors in this case, and a spurious regression problem occurs. The stationarity of the variables in the study wasdeterminedwithADFandPPunitroottests.Accordingly,itwasconcludedthatpublicexpendituresand the public debt stock series are stationary at their level values. Still, public revenues and budget balance are stationary by taking their first-degree differences. After determining the stationarity of the variables, the models were passed to the estimation phase, and the most appropriate lag period was automatically determined according to the Schwarz information criteria. Because of the NARDL co-integration test, it was determined that there was a co-integration relationship in both models. Therefore, it was found that Türkiye had fiscal sustainability for the period examined in both models. However, when the coefficients of the independent variables in both models were examined, it was seen that fiscal sustainability was weak for Türkiye in the period studied. Because the coefficients of the independent variables are between 0 and 1. When the NARDL long-term estimation results were discussed, negative decreases in public expenditures increased public revenues, while decreases in public debt stock increased the budget balance. No statistically significant effect of positive changes in public spending on public revenues was found. Similarly, no statistically significant impact of positive changes in the public debt stock on the budget balance was found. In addition, when the asymmetric effects of the variables in the short and long term were determined, it was found that increases or decreases in public expenditures in the short and long term had asymmetric effects on public revenues in model 1. In Model 2, it was determined that the public debt stock has a symmetric impact on the primary balance in both the short and long term. Finally, several model accuracy tests were applied to test the validity of the models. According to the results of these tests, it was concluded that there was no autocorrelation, heteroscedasticity, or model construction error in the models. In addition, it was determined that the coefficients obtained in the models with the CUSUM and CUSUMQtests were stable, and the interpretations made based on these coefficients were meaningful.

Based on the results obtained in the study, it is seen that Türkiye has fiscal sustainability in terms of both models, but it is realised at a weak level. However, it has been determined that asymmetric effects regarding budget deficits are effective on fiscal sustainability. Reducing budget deficits in Türkiye, making public expenditures effective and efficient, and collecting public revenues in a timely and complete manner are important. The borrowing requirement is expected to decrease if budget expenditures are met budget revenues. Thus, the level of sustainability in Türkiye can also be increased. In this context, it is expected that public debts will be sustainable in budget deficits where fiscal policies that also consider asymmetric effects are implemented. Because asymmetric information is a market failure, taking these effects into account when implementing the necessary policy implementations ensures that the expected impact of the policies is more realistic. In addition, the implementation of medium-term plans and programmes that are useful in ensuring the stability of fiscal policies in a way that will reach their targets can also be effective in ensuring fiscal sustainability. If fiscal sustainability exists, the state can provide social needs effectively and efficiently today and in the future with existing resources and maximise social welfare. At the same time, disciplining fiscal policies by ensuring f iscal sustainability is important in facilitating the implementation of monetary policies to achieve the expected targets. Undoubtedly, the findings are important for policymakers to determine and implement appropriate policies.