Abstract:

There are two basic views about the impact of public expenditures on economic growth in the economic literature. Economists who follow the Classical economic approach argue that the increase in public spending will limit the efficiency of private sector activities and therefore affects economic growth negatively. On the other hand, economists advocating Keynesian approach argue that increased public spending will have a positive impact on national income within the framework of the multiplier mechanism. In our study it was tested the thesis expressed above using data relating to the Turkish economy. For this purpose, the relationship between public expenditures and economic growth has been examined using the ARDL Model for the quarterly data between 2006 and 2018. Empirical results show that there is a positive relationship between public spending and economic growth in the short run and a negative relationship in the long run. Thus, in relation to the impact on the economic growth of public spending in Turkey, the Keynesian approach is valid in the short term while the Classical approach is valid in the long term. These findings indicated that expansionary fiscal policies to be implemented in Turkey is only preferable for a short period in the case of growth rate is sacrificed in the long run.

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