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

Author

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  • Cem ÇEBİ

    (Merkez Bankası)

Abstract

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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    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

    Keywords

    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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