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The Effects of Political Fragmentation on Fiscal Deficits in Turkey

Author

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  • Yesim Kustepeli

    (Department of Economics, Faculty of Business, Dokuz Eylül University)

  • Gülcan Önel

    (Department of Economics, Faculty of Business, Dokuz Eylül University)

Abstract

Recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued (Volkerink and de Haan, 2001). The experience of high government deficits of developed nations in the 1980s led researchers to analyze the reasons for this and among other factors they have argued that political variables could also explain budget deficits (Sutter, 2003). This study aims to investigate the effects of the political parties for fiscal deficits in Turkey for 1976-2004 period. Our results show that the most important variable in explaining the budget deficit to GDP ratio in Turkey is its lagged value. The political dispersion index variable, which measures the effect of the number of parties in the government in power, has proven to have a minor effect. Only the coalition governments with two or more parties are found to have higher budget deficit to GDP ratios. Ideology of the governments in power is important for the budget deficit to GDP ratio when it is considered with the number of parties in the government in power. In general, it can be said that polarization, fragmentation and ideology of the governments do not play an important role in explaining the budget deficit to GDP ratio.

Suggested Citation

  • Yesim Kustepeli & Gülcan Önel, 2005. "The Effects of Political Fragmentation on Fiscal Deficits in Turkey," Discussion Paper Series 05/02, Dokuz Eylül University, Faculty of Business, Department of Economics, revised 23 Nov 2005.
    • Handle: RePEc:deu:dpaper:0502
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    References listed on IDEAS

    as
    1. Khemani, Stuti, 2002. "Federal politics and budget deficits: evidence from the states of India," Policy Research Working Paper Series 2915, The World Bank.
    2. Ibrahim Tutar & Aysit Tansel, 2000. "Political Business Cycles, Institutional Structure and Budget Deficits in Turkey?," Working Papers 2019, Economic Research Forum, revised 07 Jun 2000.
    3. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    4. Volkerink, Bjorn & De Haan, Jakob, 2001. "Fragmented Government Effects on Fiscal Policy: New Evidence," Public Choice, Springer, vol. 109(3-4), pages 221-242, December.
    5. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
    6. Sutter, Matthias, 2003. "The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits," Public Choice, Springer, vol. 116(3-4), pages 313-332, September.
    7. Huber, Gerald & Kocher, Martin & Sutter, Matthias, 2003. "Government Strength, Power Dispersion in Governments and Budget Deficits in OECD-Countries: A Voting Power Approach," Public Choice, Springer, vol. 116(3-4), pages 333-350, September.
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    Cited by:

    1. Ibrahim Tutar & Aysit Tansel, 2012. "An Analysis Of Political And Institutional Power Dispersion: The Case Of Turkey," Contemporary Economic Policy, Western Economic Association International, vol. 30(4), pages 548-565, October.

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    Keywords

    Budget deficits; political fragmentation; dispersion indexes;
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