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IMF Programmes, Fiscal Policy and Growth: Investigation of Macroeconomic Alternatives in an OLG Model of Growth for Turkey1

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  • Ebru Voyvoda

    (Bilkent University, Ankara, Turkey.)

  • Erinç Yeldan

    (Bilkent University, Ankara, Turkey.)

Abstract

In this paper, we investigate the fiscal policy alternatives on domestic debt management and public expenditures on education, cohort welfare, and growth for the Turkish economy. We utilise a growth model in the overlapping generations (OLG) tradition with intertemporally optimising agents and open capital markets, calibrated to the Turkish economy in 1990s. We examine the macroeconomic effects of the current IMF-led austerity programme driven by the objective of attaining primary fiscal surpluses and illustrate the ruinous effects of constrained human capital investments due to insufficient funds to public education, and constrained real production activities due to the current mode of financing of domestic debt. We then examine various taxation alternatives to mitigate the reductions in the availability of public funds to reproducible factors of production. Our results suggest that the current fiscal programme based on the primary surplus objective suffers from serious trade-offs on growth and fiscal targets, and that an alternative public expenditures programme with the objective of reviving public funds for education and for social infrastructure is likely to produce superior economic performance. Comparative Economic Studies (2005) 47, 41–79. doi:10.1057/palgrave.ces.8100065

Suggested Citation

  • Ebru Voyvoda & Erinç Yeldan, 2005. "IMF Programmes, Fiscal Policy and Growth: Investigation of Macroeconomic Alternatives in an OLG Model of Growth for Turkey1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 47(1), pages 41-79, March.
    • Handle: RePEc:pal:compes:v:47:y:2005:i:1:p:41-79
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    Citations

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    Cited by:

    1. Cagatay Telli & Ebru Voyvoda & Erinc Yeldan, 2008. "Macroeconomics of twin-targeting in Turkey: analytics of a financial computable general equilibrium model," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 227-242.
    2. repec:ilo:ilowps:463375 is not listed on IDEAS
    3. Ebru Voyvoda & Erinc Yeldan, 2015. "Aspects of Fiscal Policy in Turkey," Working papers wpaper109, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Yeldan, Erinç. & Ercan, Hakan., 2011. "Growth, employment policies and economic linkages : Turkey," ILO Working Papers 994633753402676, International Labour Organization.
    5. Annabi, Nabil & Harvey, Simon & Lan, Yu, 2011. "Public expenditures on education, human capital and growth in Canada: An OLG model analysis," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 852-865.
    6. Pedro Bação & Marta Simões, 2020. "Is the Welfare State Relevant for Economic Growth? Evidence for Portugal," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(3), pages 494-520, September.
    7. repec:ilo:ilowps:467426 is not listed on IDEAS
    8. Maisonnave, Hélène & Decaluwé, Bernard, 2008. "Educational Policy, Growth and Labor Market in South Africa: A Dynamic Computable General Equilibrium Analysis," Conference papers 331689, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Pedro Bação & Marta Simões, 0. "Is the Welfare State Relevant for Economic Growth? Evidence for Portugal," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 0, pages 1-27.
    10. Voyvoda, Ebru & Yeldan, Erinc, 2005. "Managing Turkish debt: An OLG investigation of the IMF's fiscal programming model for Turkey," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 743-765, September.
    11. Yeldan, Erinc., 2011. "Macroeconomics of growth and employment : the case of Turkey," ILO Working Papers 994674263402676, International Labour Organization.

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