The Relationship Between Growth, Expenditure, and Income Fiscal Policy in Turkey: ARDL-ECM ModelMustafa Alpin Gülşen
The aim of the study is to analyze the effect of public revenues and expenditures on economic growth, topic that is often discussed in the theory of finance. For this purpose, rather than use total public revenues and expenditures, in the analysis, their components were used. The components of public revenues include tax revenues, non-tax ordinary revenues, factor revenues, and social funds. The components of public expenditures include current expenditures, investment expenditures, and transfer expenditures are used as components of public expenditures. This study examines the effect of fiscal policies on economic growth in Turkey. For this purpose, the effects of public revenue and expenditure components on gross domestic product growth between 1999 and 2019. The autoregressive distributed lag error correction (ARDLECM) model -was used to estimate the short- and long-term coefficients of the variables on growth. According to the findings, a one-unit increase in tax revenues, non-tax ordinary incomes, factor incomes, and social funds affects economic growth by 4.90, -0.71, 3.64, and 0.63 units, respectively. In terms of public expenditures, current expenditures and transfer expenditures affect economic growth by 2.41 and -1.85 units, respectively. In addition, the deviation from a short-term balance in terms of public revenues is approximately 1.6; Public expenditures, reach a long-term balance by improving in 3.33 years. The long-term effect of public investment expenditures on economic growth was statistically insignificant.
Türkiye’de Maliye Politikalarının Büyüme, Harcama ve Gelir İlişkisi: ARDL-ECM ModeliMustafa Alpin Gülşen
Çalışmanın amacı, maliye teorisinde sıklıkla tartışılan kamu gelir ve harcamalarının iktisadi büyümeye etkisini analiz etmektir. Bu amaçla analizde kamu gelir ve harcamalarının toplam büyüklüğü yerine bileşenleri kullanılmıştır. Kamu gelirleri bileşenleri olarak vergi gelirleri, vergi dışı normal gelirler, faktör gelirleri ve sosyal fonlar; kamu harcamaları bileşenleri olarak da cari harcamalar, yatırım harcamaları ve transfer harcamaları kullanılmıştır. Bu çalışmanın kapsamını Türkiye’de maliye politikalarının iktisadi büyümeye olan etkisi oluşturmaktadır. Bu amaçla 1999-2019 yılları arasında Türkiye’de kamu gelir ve harcama bileşenlerinin GSYH büyümesine olan etkisi incelenmiştir. Değişkenlerin büyümeye olan etkisinin kısa ve uzun dönemli katsayılarını tahmin edebilmek amacıyla ARDL-ECM yöntemi kullanılmıştır. Çalışmanın bulgularına göre uzun vadede vergi gelirleri, vergi dışı olağan gelirler, faktör gelirleri ve sosyal fonlardaki bir birimlik artışın iktisadi büyümeyi sırasıyla 4,90, -0,71, 3,64 ve 0,63 birim etkilemektedir. Kamu harcamaları açısından ise cari harcamalar ve transfer harcamaları sırasıyla 2,41 ve -1,85 etkilemektedir. Çalışmanın bir diğer bulgusuna göre kamu gelirleri açısından kısa vadede oluşacak bir dengeden sapmanın yaklaşık 1,6; kamu harcamaları açısından ise 3,33 yılda düzelerek uzun dönem dengesine ulaşmaktadır. Diğer taraftan kamu yatırım harcamalarının iktisadi büyüme üzerindeki uzun dönemli etkisi istatistiksel olarak anlamsız çıkmıştır.
The effect of fiscal policy on economic growth is frequently discussed in the literature-; it is thought to have bipolar structure in which public intervention affects growth either positively or negatively. Turkey’s financial structure has undergone various changes in its fiscal policy to be integrated with global developments. When Turkey moved away from global integration, there were crises (i.e., such as the crises occurring in 1994, 1998, 2001, and 2008). Many changes in fiscal policy were made to avoid the negative effects of these crises. Perhaps the most important decisions were made to ensure fiscal discipline after the 2001 crisis. In Turkey, a substitution relationship emerges between the private and public sectors in times of crisis. After the contraction of demand during the crisis periods, the public sector follows non-cyclical fiscal policy in terms of expenditures and investment policy.
This study examines the short- and long-term effects of public expenditure and income components on economic growth in Turkey in the period of 1999-2019 using the autoregressive distributed lag error correction (ARDL-ECM) model. Investment and borrowing issues will be discussed in terms of public expenditures and revenues. The 1999-2019 period was chosen for this study due to data constraints. The reason for choosing the ARDL-ECM method is to analyze the econometric conditions in the data and the short- and long term coefficients between the variables.
In theory, the efficiency of investment in public capital significantly affects the public capital stock. However, the -investment-growth relationship expresses how an increase in public investment is translated into more public capital and higher private capital productivity, resulting in greater economic growth (Gurara et al., 2019). The higher the rate of return on public capital, the greater the impact of increased public capital on gross domestic product (GDP). Therefore, the rate of return on public capital may result in higher output and positively affect the investment-growth relationship. However, marginal public investment can lead to lower GDP growth, especially in low-productivity countries. Ultimately, the effect of productivity on the investment-growth link is unclear (Berg et al., 2018, p. 28). Therefore, one way of assessing the public investment/debt relationship in countries is to look for higher GDP growth than public investment growth. To finance the increase in public investments, governments have to borrow domestic and foreign debt. To avoid large increases in the debt level, the government must make fiscal adjustments. These include public revenue generation (tax or non-tax revenues) and public spending cuts (public consumption and transfer cuts). However, the uncontrolled increase in debt accumulation may increase the vulnerabilities of countries arising from exchange rate risk (Kumar et al., 2019, p. 3-5). The theoretical structure also differs according to the effects of fiscal policy on economic growth, according to the countries’ public revenues, debt stock, and public expenditure efficiency. This difference in the theoretical structure is also seen in the quantitative studies in the literature.
This study examines the effect of fiscal policy on economic growth in Turkey by examining the effect of the components of public revenue and expenditures on GDP growth in Turkey between 1999 and 2019 were examined. ARDL-ECM method was used to estimate the short- and long-term coefficients of the effects of the variables on growth. According to the findings of the study, a one-unit increase in tax revenues, non-tax ordinary incomes, factor incomes, and social funds affects economic growth by 4.90, -0.71, 3.64, and 0.63 units, respectively. In terms of public expenditures, current expenditures and transfer expenditures affect 2.41 and -1.85, respectively. According to another finding, the deviation from a short-term balance in terms of public revenues is approximately 1.6; In terms of public expenditures, it reaches a long-term balance by improving in 3.33 years. On the other hand, the longterm effect of public investment expenditures on economic growth was statistically insignificant.