Abstract:

Purpose of the study; The relationship between current account deficits and budget deficits, which causes important debates in the literature, has been examined in terms of the Ricardian Equivalence Hypothesis and Traditional Approach by using data between the years 1985-2017. At the same time, this relationship also applies to the case of Turkey, in this study, '' a budget deficit in Turkey’s economy, the current account deficit is the cause of 'hypotheses have been put forward. The relationship between current account deficits and budget deficits has been tried to be tested empirically with the Granger causality test. If the expenditures made in the public sphere exceed the revenues, the excesses arising are expressed as "budget deficit". It is stated that taxes constitute an important part of the income of developing countries. For this reason, the state concentrates on indirect taxes or goes into borrowing in order to reduce the deficits that occur when the income taxes cannot be collected. Fluctuations in the economic field are the biggest factor causing budget deficits and budget deficits adversely affect the economies of both developed and developing countries. The volume of budget deficits is also expanding due to reasons such as not increasing public revenues and expenditures in parallel and insufficient resources. As a result, countries need to set macroeconomic targets to reduce or eliminate these deficits. Because current account deficits are seen as an important problem for both developed and developing countries. In the study Hence, with the twin deficit occurring in Turkey it appeared to be associated with each other.

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