Abstract:

The purpose of this study is to examine the relationship between consumption expenditures and economic growth for Turkey over the period of 10 years with path analysis of the structural equation method. With the tourism, government and household consumptions data from the Turkish Statistical Institute database, this paper develops the causal model using the path analysis to estimate the direct effects of these variables on economic growth in Turkey. Findings of this study show that there are positive correlations among variables. The coefficients of tourism, government and private consumptions on economic growth are significant (correlation coefficients, r= 0.07, 0.23 and 0.72 respectively). We obtained clear evidence that the effects of household consumption on economic growth are higher and significant compared to private and tourism government spending. Therefore, Turkey’s fiscal plan should direct expenditures into the productive areas such as education, health, agriculture, energy, technology and govern-ment needs to stimulate household consumption by redesigning social security policy, increasing consumer’s credit, reducing the tax rate etc.

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