Özet:

The effect of inflation on the budget balance is an area that has been the subject of research in the economic literature. The changes caused by inflation on the budget balance through tax revenues and public expenditures are referred to as the Tanzi and Patinkin effects. The increase in the budget deficits due to inflation eroding the real value of tax revenues is called the Tanzi Effect, while the positive effect of the budget balance due to the inflation decreasing the real value of public expenditures is defined as the Patinkin Effect. In this study, the existence of Tanzi and Patinkin effects for 16 Eurozone countries between 1995 and 2020 is examined with second generation panel data methods. According to the results of the panel cointegration method proposed by Westerlund (2007), a cointegration relationship is determined between inflation and the budget balance. However, the CCEMG panel cointegration estimator developed by Pesaran (2006) is used to determine whether the Tanzi or Patinkin effects are valid in this relationship. Findings from the estimator provide evidence that the Tanzi effect is valid in the Eurozone countries studied. According to the results, structuring the tax collection processes in a way that is least affected by inflation is important for sustainable fiscal discipline.

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