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Özel Sektör Tasarruflarında Mali Politika Etkileri
[The Effect of Fiscal Policy on Private Sector Savings]

Author

Listed:
  • Erdogdu, Oya Safinaz

Abstract

The economics literature argues that once Ricardian hypothesis is valid fiscal policy do not have any real impact on macroeconomy via consumption decisions. However, it has beeen argued by many studies on fiscal dominance that there are exceptions to the validity of Ricardian Equivalence theorem and under certain conditions, fiscal policy can effect monetary policy and macroeconomic variables like inflation through consumption decisions. Using threshold vector aurotregression (TVAR) methodology, this study analyzes the possible non linear fiscal impact of government debt on consumption / saving decisions of economic agents. The empirical analysis of government debt, interest rate and private savings of Turkey documents that fiscal policy effects on private agents saving behavior and monetary policy variable follows a non linear pattern. Hence, the effects of interest rate on saving decisions of agents differ according to a threshold level of debt. The impulse response analysis indicates that under high (low) debt regime, higher interest rate leads to higher (lower) consumption levels. This result supports the argument on the requirement for joint commitment of fiscal and monetary policies to control inflation. The empirical results also notes the positive impact of decreasing government debt on private savings under every state, but also notes this this effect is persistent under low debt regime.

Suggested Citation

  • Erdogdu, Oya Safinaz, 2007. "Özel Sektör Tasarruflarında Mali Politika Etkileri [The Effect of Fiscal Policy on Private Sector Savings]," MPRA Paper 8681, University Library of Munich, Germany, revised 18 Jan 2008.
    • Handle: RePEc:pra:mprapa:8681
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    3. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    4. Nathan S. Balke, 2000. "Credit and Economic Activity: Credit Regimes and Nonlinear Propagation of Shocks," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 344-349, May.
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    More about this item

    Keywords

    savings; threshold VAR; government debt;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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