Advanced Search
MyIDEAS: Login to save this paper or follow this series

Expansionary Fiscal Consolidations: New Evidence from Turkey

Contents:

Author Info

  • Fatih Ozatay

    ()
    (TOBB University of Economics and Technology and TEPAV, Ankara, Turkey)

Abstract

After the February 2001 crisis, Turkey started to implement a new economic program. One of its aims was to reduce public debt that had jumped to a record high level. The resulting fiscal consolidation was rather exceptional. By the end of 2006, public debt-to-GDP ratio had declined by 43 percentage points. Despite this outstanding fiscal consolidation, the average growth rate attained in this period was almost twice that of the long-term growth rate. Given that shallowness of the Turkish financial markets had lead to credit constraints, it was tempting to study the reasons behind this performance. We argue that fiscal consolidation sharply reduced default risk, increased business confidence and improved banks’ and non-financial firms’ balance sheets, causing, in turn, a significant rise in credit supply and demand. Improvement in the private sector’s balance sheets and a decline in the option value of waiting, both together, boosted private sector demand.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.erf.org.eg/CMS/getFile.php?id=1212
Our checks indicate that this address may not be valid because: 500 Can't connect to www.erf.org.eg:80 (10060). If this is indeed the case, please notify (Namees Nabeel)
Download Restriction: no

File URL: http://www.erf.org.eg/cms.php?id=NEW_publication_details_working_papers&publication_id=962
Our checks indicate that this address may not be valid because: 500 Can't connect to www.erf.org.eg:80 (10060). If this is indeed the case, please notify (Namees Nabeel)
Download Restriction: no

Bibliographic Info

Paper provided by Economic Research Forum in its series Working Papers with number 406.

as in new window
Length: 27 pages
Date of creation: May 2008
Date of revision: May 2008
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:406

Contact details of provider:
Postal: 7 Boulos Hanna Street, Dokki, Cairo
Phone: 202-3370810
Fax: 202-3616042
Email:
Web page: http://www.erf.org.eg
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2001. "Prospective Deficits and the Asian Currency Crisis," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1155-1197, December.
  2. António Afonso & Christiane Nickel & Philipp Rother, 2005. "Fiscal Consolidations in the Central and Eastern European Countries," Working Papers Department of Economics 2005/03, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  3. Francesco Giavazzi & Tullio Jappelli & Marco Pagano & Marina Benedetti, 2005. "Searching for Non-Monotonic Effects of Fiscal Policy: New Evidence," CSEF Working Papers 142, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  4. Hasan Ersel & Fatih Özatay, 2008. "Fiscal Dominance and Inflation Targeting: Lessons from Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 38-51, November.
  5. Richard Cantor & Frank Packer, 1995. "Sovereign credit ratings," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Jun).
  6. Olcay Yucel Culha & Fatih Ozatay & Gulbin Sahinbeyoglu, 2006. "The Determinants of Sovereign Spreads in Emerging Markets," Working Papers 0604, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  7. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," CEPR Discussion Papers 2374, C.E.P.R. Discussion Papers.
  8. Sutherland, Alan, 1995. "Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?," CEPR Discussion Papers 1246, C.E.P.R. Discussion Papers.
  9. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
  10. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May.
  11. Bas van Aarle & Harry (ed.) Garretsen, 2001. "Keynesian, Non-Keynesian or No Effects of Fiscal Policy Changes? The EMU Case," CESifo Working Paper Series 570, CESifo Group Munich.
  12. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
  13. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yigit, 2005. "Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey," Working Papers 0516, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Ortiz, Alberto & Pablo, Ottonello & Sturzenegger, Federico & Talvi, Ernesto, 2007. "Monetary and Fiscal Policies in a Sudden Stop: Is Tighter Brighter?," Working Paper Series rwp07-057, Harvard University, John F. Kennedy School of Government.
  15. Hakan Kara & Fethi Ogunc & Umit Ozlale & Cagri Sarikaya, 2007. "Estimating the Output Gap in a Changing Economy," Southern Economic Journal, Southern Economic Association, vol. 74(1), pages 269-289, July.
  16. Bacchetta, Philippe & Gerlach, Stefan, 1997. "Consumption and credit constraints: International evidence," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 207-238, October.
  17. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
  18. Fatih Ozatay & Erdal Ozmen & Gülbin Sahinbeyoglu, 2007. "Emerging Market Sovereign Spreads, Global Financial Conditions and U.S. Macroeconomic News," ERC Working Papers 0707, ERC - Economic Research Center, Middle East Technical University, revised Dec 2007.
  19. Favero, Carlo A & Giavazzi, Francesco, 2004. "Inflation Targeting and Debt: Lessons from Brazil," CEPR Discussion Papers 4376, C.E.P.R. Discussion Papers.
  20. Jappelli, Tullio & Pagano, Marco, 1988. "Consumption and Capital Market Imperfection: An International Comparison," CEPR Discussion Papers 244, C.E.P.R. Discussion Papers.
  21. Fatih Ozatay & Guven Sak, 2003. "Banking Sector Fragility and Turkey’s 2000–01 Financial Crisis," Working Papers 0308, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  22. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
  23. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
  24. Cafer Kaplan & Erdal Ozmen & Cihan Yalcin, 2006. "The Determinants and Implications of Financial Asset Holdings of Non-Financial Firms in Turkey : An Emprical Investigation," Working Papers 0606, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  25. repec:fth:harver:1435 is not listed on IDEAS
  26. Graciela Kaminsky & Sergio L. Schmukler, 2002. "Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?," World Bank Economic Review, World Bank Group, vol. 16(2), pages 171-195, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:406. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Namees Nabeel).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.