THE RELATIONSHIP BETWEEN PUBLIC SECTOR REVENUES AND EXPENDITURES IN TURKEY

Since the 2008 financial crisis, the topic about the relation of public revenues on the expenditures in affecting fiscal sustainability has received particular attentions by several economists. For this reason, it is necessary to investigate revenue and expenditures relationship for Turkey. In this paper, the empirical relationship between two variables has been investigated by providing econometric models. First, we employed classic and structural break unit roots. After determining the level of unit root of mentioned series, the study found evidence of a cointegration relation between the government revenues and expenditures by employing Bounds test approach. Then, ARDL method was used with the aim of examining the short and long-run coefficients of co-integration relations. According to Bounds Test results, two variable was found to be a cointegrated. The findings of the ARDL method revealed that the change in public sector revenues have significant impact on public sector expenditures. This study provided the evidence of financial sustainability of expenditures with government revenues which can be supported the concept of fiscal sustainability in Turkey. 

THE RELATIONSHIP BETWEEN PUBLIC SECTOR REVENUES AND EXPENDITURES IN TURKEY

Since the 2008 financial crisis, the topic about the relation of public revenues on the expenditures in affecting fiscal sustainability has received particular attentions by several economists. For this reason, it is necessary to investigate revenue and expenditures relationship for Turkey. In this paper, the empirical relationship between two variables has been investigated by providing econometric models. First, we employed classic and structural break unit roots. After determining the level of unit root of mentioned series, the study found evidence of a cointegration relation between the government revenues and expenditures by employing Bounds test approach. Then, ARDL method was used with the aim of examining the short and long-run coefficients of co-integration relations. According to Bounds Test results, two variable was found to be a cointegrated. The findings of the ARDL method revealed that the change in public sector revenues have significant impact on public sector expenditures. This study provided the evidence of financial sustainability of expenditures with government revenues which can be supported the concept of fiscal sustainability in Turkey. 

___

  • CARLBERG, M. 1995, Sustainability and Optimality of Public Debt, Heidelberg,Hamburg, Almanya
  • DICKEY, D. A., and FULLER, W. A., 1979, Distribution for the estimates for autoregressive time series with a unit root, Journal of the American Statistical Association, 74, 427–31
  • GUJARATI, D, N. 1999, Basic Econometrics. Mc Graw Hill.3rd Edition. İstanbul: Literatür Yayıncılık.
  • HABIBI, F. and RAHIM, K.A. 2009, A Bound Test Approach to Cointegration of Tourism Demand, American Journal of Applied Sciences, 6 (11): 1924-1931
  • LEE, J. and STRAZICICH, M. C. 2003, Minimum Lagrange Multiplier Unit Root Test With Two Structural Breaks, The Review of Economics and Statistics. 85(4): 1082-1089.
  • MANGIR, F., ERTUGRUL, H.M. 2012, Vergi Yükü ve Ekonomik Büyüme İlişkisi: 1988- 2011 Türkiye Örneği, Maliye Dergisi, 162( Ocak –Haziran): 256-265
  • NARAYAN, Paresh K., 2005,The Government Revenue and Government Expenditure Nexus: Empirical Evidence from Nine Asian Countries . Journal of Asian Economics, Vol. 15, pp. 1203-1216.
  • NARAYAN, S. ve NARAYAN, P.K. , 2004, Determinats of Demand of Fiji’s Exports: An Empirical Investigation, The Developing Economics, XVII-1 95-112.
  • NG, S. ve PERRON, P. (2001),”Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power”, Econometrica, 69: 1519-1554.
  • NYAMONGO, M ,Sichei, M and SCHOEMAN, N (2007) Government Revenue and Expenditure Nexus in South Africa, Sajems Ns 10 No 2.
  • OGUJIUBA, Kanayo and ABRAHAM, Terfa (2012). “Testing the Relationship between Government Revenue and Expenditure: Evidence from Nigeria” Journal of Economics and Finance; Vol. 4, No. 11.
  • PAYNE, James, MOHAMMADI, Hassan and CAK Murat ,2008, Turkish budget deficit sustainability and the revenue-expenditure nexus, Applied Economics, 40:7, 823-830
  • PERRON, P. 1989, The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis, Econometrica 57(2): 1361-1401.
  • PESARAN, M.H., SHIN, Y. and SMITH, R.J. 2001, Bounds Testing Approaches to the Analysis of Level Relationships, Journal of Applied Econometrics, 16:289-326.
  • ZIVOT, E. and ANDREWS, D. 1992, Further Evidence on the Great Crash, the Oil-Price Shock and the Unit-Root Hypothesis”, Journal of Business Economic Statistics, 10(3): 251- 270.