Abstract
Price stability is the goal of economic policy. The policies implemented to achieve this goal can cause various problems such as financing the public deficit in economies. In this study, it is investigated whether public deficit financing has an impact on inflation in the period of 1975-2021 in Turkey. In the analysis, the financing of the public deficit is represented by the public sector borrowing requirement. Since the money to be released to the market due to the public sector borrowing requirement will affect the consumer price index, it has been chosen as the dependent variable. After the stationarity analysis of the series, the causality relationship between the series was investigated with the Toda-Yamamoto causality test. A relationship from inflation indicator to public deficit financing has been determined. The findings of the analysis for the period examined showed that, contrary to the widely accepted opinion in the literature, public deficit financing in Turkey did not cause an inflationary effect.
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