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A new approach on testing the behaviour of the governments towards sustainability of fiscal policy in a small-open and politically instable economy

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  • E. Telatar
  • N. Bolatoglu
  • F. Telatar

Abstract

This study extends Bohn's (1998) model to the context of a small-open economy suffering from political and economic instabilities. A Markov-switching model is developed by incorporating a Bayesian Gibbs sampling simulation. The model is estimated for Turkish economy over the period of 1980-2001 to analyse the relationship between primary surpluses and government total liabilities. The main result of the study is that the relationship might be unstable due to the changes in intentions of the governments towards sustainability of fiscal policy.

Suggested Citation

  • E. Telatar & N. Bolatoglu & F. Telatar, 2004. "A new approach on testing the behaviour of the governments towards sustainability of fiscal policy in a small-open and politically instable economy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 333-336.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:5:p:333-336
    DOI: 10.1080/1350485042000221643
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    References listed on IDEAS

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    1. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
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    Cited by:

    1. Yong-Huang Lin & Yun-Wu Wu & Jer-Shiou Chiou, 2008. "The impacts of sociopolitical instability on construction dimension," Applied Economics Letters, Taylor & Francis Journals, vol. 15(15), pages 1207-1211.
    2. Amir Kia & Norman Gardner, 2009. "Analyzing the Fiscal Process under a Stochastic Environment: Evidence from Egypt," Working Papers 475, Economic Research Forum, revised Mar 2009.
    3. Elvis Munyaradzi Ganyaupfu, 2014. "Fiscal Sustainability in South Africa: Recent Evidence," Journal of Social Economics, Research Academy of Social Sciences, vol. 1(4), pages 159-167.
    4. Mr. Evan C Tanner & Issouf Samaké, 2006. "Probabilistic Sustainability of Public Debt: A Vector Autoregression Approach for Brazil, Mexico, and Turkey," IMF Working Papers 2006/295, International Monetary Fund.
    5. Amir Kia, 2005. "Sustainability of the Fiscal Process in Developing Countries- Egypt, Iran and Turkey: A Multicointegration Approach – revised version: Fiscal Sustainability in Emerging Countries: Evidence from Iran a," Carleton Economic Papers 05-08, Carleton University, Department of Economics, revised Nov 2008.
    6. Amir KIA, 2009. "Analyzing the Fiscal Process Under a Stochastic Environment: Evidence From Egypt," EcoMod2009 21500053, EcoMod.
    7. Kia, Amir, 2008. "Fiscal sustainability in emerging countries: Evidence from Iran and Turkey," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 957-972.
    8. Mr. Evan C Tanner & Mr. Yasser Abdih, 2009. "Frugality: Are We Fretting Too Much? Household Saving and Assets in the United States," IMF Working Papers 2009/197, International Monetary Fund.

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