Abstract:

In this study, the relationship between GDP, inflation and current account balance variables, which express macroeconomic performance, and public expenditures were investigated with VAR analysis on the example of Turkey by obtaining quarterly data between January 2008 and August 2022. Firstly, by taking the first-order difference of the time series, the series were made stationary and included in the model by deciding on the appropriate lag length. Wald test, Impulse-Response Analysis and Granger Causality test, in which short-term causal relationships were investigated, were applied and the results were interpreted in detail. A two-way granger causality relationship is observed between public expenditures and GDP in the short run. This result also supports Wagner's Law. Dynamic relationships between the impulse-response analysis time series were observed. According to the Wald Test results, it has been concluded that the realized public expenditures and the economic growth rate have an effect on the current account balance. As a result, it can be stated that there are statistically significant relationships between public expenditures and macroeconomic variables, and for this reason, public expenditures should be taken into account in the formation of macroeconomic policies.

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