Abstract
Since the 2008 financial crisis, the topic about the relation of public revenues on the expenditures in affecting fiscal sustainability has received particular attentions by several economists. For this reason, it is necessary to investigate revenue and expenditures relationship for Turkey. In this paper, the empirical relationship between two variables has been investigated by providing econometric models. First, we employed classic and structural break unit roots. After determining the level of unit root of mentioned series, the study found evidence of a cointegration relation between the government revenues and expenditures by employing Bounds test approach. Then, ARDL method was used with the aim of examining the short and long-run coefficients of co-integration relations. According to Bounds Test results, two variable was found to be a cointegrated. The findings of the ARDL method revealed that the change in public sector revenues have significant impact on public sector expenditures. This study provided the evidence of financial sustainability of expenditures with government revenues which can be supported the concept of fiscal sustainability in Turkey.
Highlights
Public expenditure is one of the most significant and controversial issues of our time
Avoiding the public debt crises, political efforts are increased to balance between public sector expenditures and revenues
Our study found evidence of a cointegration relation between the government revenues and expenditures by employing Bounds test approach
Summary
Public expenditure is one of the most significant and controversial issues of our time. In many industrialized countries, skyrocketing and chronic budget deficits have constantly raised the ratio of public debt to GDP. After balanced budgets and even surpluses in the late 1990s, these countries has returned to deficits in recent years. Their public debt has grown to more than twice the size of GDP. These developments raise serious concerns about public debt sustainability. Followed to Keynesian macro policies, public expenditures and debt has risen constantly after the 1970s and the rise in public debt was bigger than the GDP growth in many industrialized country. The third section provides empirical results while the last part is reserved for our comments concerning the issue
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