An Investigation of Tax Revenues and Government Spending: Evidence from Turkey (original) (raw)
Related papers
Tax Revenue and Main Macroeconomic Indicators in Turkey
Abstract This study is about the behavior of main macroeconomic indiactors and their interaction with tax revenue with annual data over 1980-2013 in Turkey. The main purpose is to study the causality between tax revenue and a broad list of indicators over the stated period. First we present descriptive statistics and then test for the stationarity of the variables after which we test for the existence and direction of Granger causality between pairs of indicators proven to be stationary. In the last part of the study we search for the permanent long-run relationship via the existense of cointegration among variables after which we establish the error correction mechanism. We have intentionally selected the time span since Turkey has experienced several shocks before being addressed in the list of G-20 and a typical emerging market economy. Besides. the socalled great recession is included in the period and is still prevailing with perplexing attitutes of managing the crisis. Our results document that there is unidirectional causality from total tax revenue to foreign direct investment and external debt stock. In addition we report a cointegrating relation among tax revenue, GDP and external debt stock. Keywords: Tax Revenue, Macroeconomic Indicators, Stationarity, ADF, Granger Causality, Cointegration, Error Correction
The Relationship Between Tax Revenue And Economic Growth In Turkey: The Period Of 1975-2011
In the study, the relationship between tax revenues and economic growth for the Turkish economy has been examined in the period of 1975-2011. Johansen Juselious cointegration test and Granger causality test have been used in order to find long term and short term relationship, respectively. Impulse-response function and variance decomposition analysis have been applied via VAR model. The findings have shown that there is interaction between tax revenue types and the economic growth in the long term and is not such an interaction in the short term. The effect of the shock given to indirect tax revenue to economic growth rate has decline; the response of growth rate to shock given to direct tax revenue has been tendency to rise up towards the end of the period. In the variance decomposition method; direct tax revenue is more effective than indirect one. But, the growth rate that is expressed by GDP (gross domestic product) or other factors affecting growth rather than tax revenue has been appeared affected itself
Trade balance is one of the most important indicators of economic stability. The increasing capital inputs in recent years, where capital liberalization is highly realized, make local currency more valuable. During this process that import grew while export went down, the foreign trade deficit has become greater, which impairs competition. Special consumption taxes that have been implemented more actively in recent years are intended to reduce domestic demand for import and avoid foreign trade deficits. This study examines whether there is a relation between the foreign trade deficit and special consumption taxes for Turkey between 01/2006 and 05/2013 using the Zivot-Andrews unit root test based on structural breaks, the Gregory-Hansen cointegration test and the Toda-Yamamoto causality analysis. Empirical practices in the study showed that neither series were stationary in level and there was no long-term relation between them. As a result of the Toda-Yamamoto method based on the Granger causality analysis, bidirectional causality was determined in between the variables.
Political economy of government spending: evidence from Turkey
2015
The scope of government spending has been continuously expanding beyond its traditional functions in many countries. Therefore, it will be useful to clarify the driving forces behind the expanding government spending. The goal of this study is to investigate the impacts of economic and political factors on government spending by using the Turkish annual data for the period of 1980-2012. We use the Engle-Granger cointegration analysis and employ an error correction model to examine the relationship between government spending and economic and political factors, namely GDP growth rate, unemployment rate, trade openness, literacy rate, democracy scores, and corruption. Estimation results indicate that political factors along with economic variables have significant impacts on Turkey’s government spending both in the short run and long run.
The Impact of Direct and Indirect Taxes on the Growth of the Turkish Economy
Public Sector Economics
Governments are able to implement monetary and fiscal policies to achieve economic objectives, such as increasing production, ensuring price stability, improving the balance of payments, and achieving full employment. While central banks carry out monetary policies, governments, in contrast, develop fiscal policies. Fiscal policy instruments can include public expenditures, taxes, and borrowing. In countries that have low savings levels, individuals participate in public expenditures by spending a large part of their income. Therefore, taxes are effectively used as a major policy instrument. The impact of both direct and indirect taxes on economic growth in Turkey has been analyzed by employing the autoregressive distributed lag (ARDL) approach. Test results suggest a positive and significant impact of indirect taxes on economic growth as well as a negative and significant impact of direct taxes.
Romanian Journal of Fiscal Policy, 2013
The main purpose of this paper is to investigate the relationship between tax revenue and government spending in order to make some policy suggestions on how to achieve fiscal discipline in Turkey. We have used the cointegrated vector autoregression (VAR) method along with the Granger causality test (1969). The empirical findings indicate that there is a uni-directional causality running from spending to tax revenue. In other words, our findings support the spend-and-tax hypothesis for fiscal discipline in Turkey over the period of 1975-2011. Since there is a uni-directional causality, running from government spending to tax revenue, spending restrictions are required to reduce budget deficits, and reducing government spending is a better solution than increasing tax revenue to obtain optimal fiscal discipline in Turkey.
Effect of Government Expenditure on GDP in the Turkish Economy
The objective of this article is to investigate the effect of government expenditure on GDP in Turkey from 2000Q1-2015Q4 by the superexogeneity test. As a consequence of satisfying both conditions of weak exogeneity and structural invariance, government expenditure is super exogenous to GDP which implies that the policy regime shift for the period of the Global Financial Crisis in Turkey did not cause structural variance in government expenditure. Indeed, the Lucas Critique which indicates that policy regime shifts cause structural breaks, appears to be refuted.
Does “Revenue-led Spending” or “Spending-led Revenue” Hypothesis Exist in Turkey?
This study aims to find the direction of linkage between government expenditure (GE) and its revenue (GR) applying econometrics in time-series techniques covering the annual data over the period of 1924 and 2011. The final result of this study exerts that there is unidirectional causality running from GE to GR, and supports spending-led revenue hypothesis. In detail, ADF unit root test indicates that both timeseries data are non-stationary at their levels, but become stationary series at their first differences. The Johansen co-integration test shows that long-run equilibrium exists between GE and GR, and the effect is statistically and economically significant. Granger causality test exhibits that there is a unidirectional causality from government expenditure to government revenue.
A PRELIMINARY ANALYSIS ON THE LONG-RUN RELATIONSHIP BETWEEN TAXATION AND GROWTH IN TURKEY
2008
Although higher taxation may lead to a fall in growth rates through distortion of decisions to invest and save, certain tax policies of the government may also enhance economic growth when government investments aiming at improving the infrastructure induces private investment. This study aims to explore the effects of taxation on growth in Turkey during the period of 1975-2004, by the use of time series analysis. In addition to total taxation, direct and indirect taxes are considered separately (income tax, goods and services tax and foreign trade tax). Engle-Granger two-step cointegration results show that as total taxation/GDP ratio and trade taxation/GDP ratio increase, growth rate decreases. There is no evidence of a long run relationship between goods and services tax/GDP ratio and growth. As for the nondistortionary income taxation, the relationship is in the reverse direction: as growth rate increases, income tax/GDP ratio increases.
2015
SPENDING AND ECONOMIC GROWTH IN TURKEY: A CAUSALITY ANALYSIS Serkan KÜNÜ , Ph.D., Asst.Prof.Dr., Igdir University, Faculty of Economic and Administrative Sciences, Department of Economics, Suveren Kampusu, Igdir, Turkey. Phone: +90-532-257 8028, E-mail: serkunu@gmail.com. Sertaç HOPOĞLU (Corresponding Author) , Ph.D., Asst.Prof.Dr., Igdir University, Faculty of Economic and Administrative Sciences, Department of Economics, Suveren Kampusu, Igdir, Turkey. Phone: +90-530-346 1544, E-mail: sertac.hopoglu@igdir.edu.tr. ABSTRACT The relationship between different sub-categories of public spending and growth in Turkey is tested in this study by utilizing annual data from the period 1990-2012 and by applying Engle-Granger Causality Test and Johansen-Juselius Cointegration Test. According to obtained results, there is only a short-run causal relationship between current spending and GDP in Turkey for the period of investigation, with the direction of the relationship running from current sp...