IDEAS home Printed from
   My bibliography  Save this article

Expansionary Fiscal Contraction Hypothesis: The Case Of Turkey


  • Levent Erdogan

    () (Anadolu University)


Recently both empiricial and theoretical studies focus on expansionary fiscal contraction hypothesis (EFC), according to which fiscal contractions stimulate consumption and also lead to an increase in aggregate demand and output. In this paper the validity of the EFC hypothesis is tested for Turkey from 1987 to 2006 by means of structural vector autoregressive (SVAR) models. Impulse response analysis is carried out by imposing long-run restrictions on Vector Error-correction Models (VECM). Structural shocks in government expenditure, terms of trade and income are decomposed into permanent and transitory components. Long-run identifying restrictions are imposed on the effects of permanent shocks. Empirical analysis indicates that fiscal contractions are not expansionary in Turkey. Based on the findings, terms of trade and supply shocks seem to have more explanatory effect on consumption expenditure.

Suggested Citation

  • Levent Erdogan, 2007. "Expansionary Fiscal Contraction Hypothesis: The Case Of Turkey," Anadolu University Journal of Social Sciences, Anadolu University, vol. 7(2), pages 117-132, December.
  • Handle: RePEc:and:journl:v:7:y:2007:i:2:p:117-132

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Fiscal Contraction; Consumption; Structural VAR; Fiscal Policy; Government Expenditure;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:and:journl:v:7:y:2007:i:2:p:117-132. 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: (Social Sciences Institute). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.