Abstract:

Fiscal policy tools have long been at the center of political debates due to being redistribution mechanism between households, regions and generations. In particular, income redistributive role of the governments gained importance after the 1929 Crisis. On the other hand; the fiscal deficits created by fiscal policy implementations, the financing of these deficits mostly through borrowing and the continuous increases in the debt obligations of the governments make the effects of government debt on the economy important. It has been analyzed for a long time which policies should be followed by the governments in order to achieve certain economic goals rather than policies governments implemented. However, these analyses do not fully explain the differences between the budget deficit, inflation and debt dynamics of the countries in which have the same economic conditions. There are many institutional and political differences such as election laws, the structure of political parties, budget laws, central banks, political instability and social polarization between countries, which are similar in terms of economic aspect. In this context, the necessity for considering the institutional differences in the political process in analyzing the changes in budget deficits and debt stock has arisen. The aim of this study is to reveal the reasons for public borrowing within the framework of political economy approaches.

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