IDEAS home Printed from https://ideas.repec.org/a/and/journl/v7y2007i2p117-132.html
   My bibliography  Save this article

Expansionary Fiscal Contraction Hypothesis: The Case Of Turkey

Author

Listed:
  • Levent Erdogan

    (Anadolu University)

Abstract

Recently both empiricial and theoretical studies focus on expansionary fiscal contraction hypothesis (EFC), according to which fiscal contractions stimulate consumption and also lead to an increase in aggregate demand and output. In this paper the validity of the EFC hypothesis is tested for Turkey from 1987 to 2006 by means of structural vector autoregressive (SVAR) models. Impulse response analysis is carried out by imposing long-run restrictions on Vector Error-correction Models (VECM). Structural shocks in government expenditure, terms of trade and income are decomposed into permanent and transitory components. Long-run identifying restrictions are imposed on the effects of permanent shocks. Empirical analysis indicates that fiscal contractions are not expansionary in Turkey. Based on the findings, terms of trade and supply shocks seem to have more explanatory effect on consumption expenditure.

Suggested Citation

  • Levent Erdogan, 2007. "Expansionary Fiscal Contraction Hypothesis: The Case Of Turkey," Anadolu University Journal of Social Sciences, Anadolu University, vol. 7(2), pages 117-132, December.
    • Handle: RePEc:and:journl:v:7:y:2007:i:2:p:117-132
    as

    Download full text from publisher

    File URL: http://www.anadolu.edu.tr/arastirma/hakemli_dergiler/sosyal_bilimler/pdf/2007-2/bolum_07.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Fiscal Contraction; Consumption; Structural VAR; Fiscal Policy; Government Expenditure;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:and:journl:v:7:y:2007:i:2:p:117-132. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Social Sciences Institute (email available below). General contact details of provider: https://edirc.repec.org/data/iianatr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.