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Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey

Author

Listed:
  • Cemal Ozturk

    (Department of Economics, Pamukkale University)

  • Gunsenin Altinkaynak

    (Department of Economics, Pamukkale University)

Abstract

This study assesses the asymmetric effectiveness of Turkey's monetary policy and fiscal policy under the inflation targeting regime in the period of 2006-2020. We employed the non-linear autoregressive distributed lag (NARDL) method and Hatemi-J asymmetric causality test with the assistance of the St. Louis equation, which relates the growth in nominal income with the growth in money supply and public expenditures. The NARDL model revealed that an increase in money supply and gross domestic product (GDP) has a positive relationship. On the other hand, a decrease in money supply and government expenditures have no significant relationship with GDP. In addition, Hatemi-J asymmetric causality results showed an asymmetric causality between money supply and GDP. It demonstrates that the money supply in Turkey during the period 2006-2020 is endogenous.

Suggested Citation

  • Cemal Ozturk & Gunsenin Altinkaynak, 2022. "Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 8(1), pages 1-14, June.
    • Handle: RePEc:ana:journl:v:8:y:2022:i:1:p:1-14
    DOI: 10.22440/wjae.8.1.1
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    More about this item

    Keywords

    St. Louis equation; NARDL; Asymmetric causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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