Proceedings of The 2nd International Conference on Advanced Research in Business, Management and Economics

Year: 2019

DOI:

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Asymmetric Causality Test for Budget Deficit and Economic Growth: The Case of Turkey

Mehmet Mucuk, Ceyhun Can Ozcan and Ibrahim Ozmen

ABSTRACT: 

Since the 1980s, neoliberal economic policies have accelerated around the world. The active participation of governments in economic activities began to change. Accordingly, significant shifts have occurred in the composition of public expenditures. In many countries, while investment expenditures decreased proportionally; current expenditures and transfer expenditures increased. However, despite the structural transformation in economic policies, budget deficits remained substantial. Therefore, budget deficits and the effects of these deficits have been constantly discussed in the economic literature. As a result of the EU debt crisis, debates on budget deficits have become one of the main agenda items of many countries, international institutions, and central banks. The negative effects of the deficits which were mainly caused by the financing of consumption expenditures were observed during the crisis. While developed countries can use the budget to support the economic growth process, budget deficits in underdeveloped countries can threaten economic stability. The aim of this study is to test the relationship between budget deficit and economic growth using asymmetric causality approach based on data of the period 1980-2011 for Turkey. According to the findings, contractionary fiscal policies adversely affect economic growth.

Keywords: :budget deficit; economic growth; debt crisis; asymmetric causality; Turkish economy