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

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

Year: 2019


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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



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. This study aims to explore the causality relationship between budget deficit and economic growth by asymmetric causality approach for the Turkish economy.

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