Abstract:

In a study covering the period 1960-2009, which discussed the relationship of public financial policies with economic growth in Turkey, the Wagner and Keynes hypotheses were analyzed by testing with econometric tests. In the study, GSMH and public finance instruments were used as variables (tax, public income, total debt stock, consolidated budget and public spending). ADF, P-P and KPSS unit root tests, Granger causality and Toda-Yamamato-Dolado-Lutkepohl (MWALD) causality tests have been used. The Zivot-Andrews breakdown test is also used. The short-term and long-term relationship between the Granger causality tests and the MWALD causality tests was studied. While Granger causality test allows for "short-term" causality analysis, MWALD test allows for "long-term" causality analysis. As a result of these tests, results were obtained as confirming Keynes’ hypothesis. The causal relationship has been identified. The empirical study on Turkey has found that the impact of the increase in public spending on economic growth is positive, meaningful and unilateral. Wagner’s hypothesis will be confirmed in the short term, although there is no reasonable cause to public spending from economic growth, a long-term double cause relationship has been seen. While many variables have an impact on economic growth in Turkey, the influence of the variables related to public finance instruments is more evident to us.

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