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The Effects of Fiscal Policy Rules on Fiscal Balance: The Perspectives on Turkish Economy

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  • Hayal Ayça ŞİMŞEK
  • Ayşe GÜNAY BEKÂR

Abstract

In public finance theory fiscal rules have been one of the main stabilization tools in obtaining budget balance and public finance balance. Many developed and developing countries have implemented specific fiscal policy rules so as to struggle with domestic distortions in economy. Balanced budget or deficit rules, borrowing rules and debt or reserve rules have been the most important rules that have been implemented in specific countries. A fiscal rule should ensure the solvency of the state, contribute to sustainability of fiscal policies by avoiding pro-cyclical behavior of the fiscal policy instruments and be simple and credible so as to be implemented effectively. In Turkish economy a specific form of a fiscal rule has been implemented since 2000 economic crisis. During 2000-07 period the Governments used a specific form of fiscal policy rule –non-interest budget surplus of 6,5 percent- so as to reduce instability. Although strict fiscal policies based on this target helped public finance balance to improve, they led private investments to decrease and unemployment rates to increase in the long run.

Suggested Citation

  • Hayal Ayça ŞİMŞEK & Ayşe GÜNAY BEKÂR, 2008. "The Effects of Fiscal Policy Rules on Fiscal Balance: The Perspectives on Turkish Economy," Sosyoekonomi Journal, Sosyoekonomi Society, issue 2008-2.
    • Handle: RePEc:sos:sosjrn:080206
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal Policy Rules; Public Finance Balance; Non-interest Budget Surplus.;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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