Abstract:

Budget deficits are among the most important problems faced by developed and developing countries today. This is also true for the Organization for Economic Co-operation and Development (OECD), which includes developed and developing countries. There are a number of tools that can be applied in the form of adjustments in the amount and components of taxes, borrowing and expenditures in closing the budget deficits. However, the answer to the question of which of these tools to use is important for both citizens and policy makers. For this reason, the relationship between public revenues and public expenditures and the direction of this relationship should be determined. In this study, the relationship between taxes and borrowing and public expenditures among public revenues was analyzed by using annual data of 36 OECD countries for the period 1995-2018. According to the cointegration results, a long-term relationship was found between tax burden and debt burden. According to the results of the causality analysis, it has been determined that the fiscal synchronization hypothesis is valid in general in OECD countries, borrowing is used for public financing, the income obtained as a result of debt increases expenditures and re-borrowing is used to finance the increased expenditures.

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