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The effects of fiscal policy shocks on output in Turkey: SVAR analysis


  • Cem ÇEBİ

    (Merkez Bankası)


This paper examines the dynamic effects of fiscal policy shocks on the Turkish economy using a three-variable structural vector autoregressive (SVAR) model for the period 1987:q1 – 2005:q4. The first differences of the variables are used, but the long-run relationship between the levels of the variables is also taken into account. In this paper, the strength of output responses to fiscal policy shocks, their persistence and timing were investigated. Following Blanchard and Perotti (2002), the identification of fiscal policy shocks is achieved by exploiting decision lags in fiscal policy and imposing reasonable restrictions on the revenue and spending elasticity to output. Consistent with the standard macroeconomic theories, it is found that while a positive spending shock increases output, a positive revenue shock decreases it.

Suggested Citation

  • Cem ÇEBİ, 2010. "The effects of fiscal policy shocks on output in Turkey: SVAR analysis," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 25(290), pages 9-34.
  • Handle: RePEc:iif:iifjrn:v:25:y:2010:i:290:p:9-34

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    References listed on IDEAS

    1. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    2. Stephen M. Miller & Frank S. Russek, 1989. "Are The Twin Deficits Really Related?," Contemporary Economic Policy, Western Economic Association International, vol. 7(4), pages 91-115, October.
    3. Bundt, Thomas & Solocha, Andrew, 1988. "Debt, deficits and the dollar," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 581-600.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Akhand A. Hossain & Anis Chowdhury, 1998. "Open-Economy Macroeconomics for Developing Countries," Books, Edward Elgar Publishing, number 831.
    6. Bilgili, Faik & Bilgili, Emine, 1998. "Bütçe açığının cari işlemler üzerindeki etkileri: Teori ve uygulama
      [The effects of budget deficit on current account balance: Theory and empirical evidence]
      ," MPRA Paper 80866, University Library of Munich, Germany.
    7. Kearney, Colm & Monadjemi, Mehdi, 1990. "Fiscal policy and current account performance: International evidence on the twin deficits," Journal of Macroeconomics, Elsevier, vol. 12(2), pages 197-219.
    8. Ki-Ho Kim, 1995. "On the Long-Run Determinants of the U.S. Trade Balance: A Comment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 17(3), pages 447-455, March.
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    Cited by:

    1. Şen, Hüseyin & Kaya, Ayşe, 2015. "Growth enhancing effect of discretionary fiscal policy shocks: Keynesian, Weak Keynesian or Non-Keynesian?," MPRA Paper 65976, University Library of Munich, Germany, revised 05 Aug 2015.

    More about this item


    Fiscal Shocks; SVAR;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General


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