The practises of fiscal policy for economic stability in turkey (an econometríc study: 1985 - 1999)
| Author | Engin Öner |
| Pages | 292-300 |
Page 292
Nearly in every country, economy policy instruments have been used such as fiscal, money, foreign trade, price and employment to achieve spesific macroeconomic goals ( full employment, production, price stability, payment balance, development and redistribution of income).
Fiscal policy is considered as; "mostly to achieve to macroeconomic policy goals, it is to reconsile of the changes which goverment modifies in taxation and expenditure programs ( Shaw, 1975:624 ) or " to regulate the full employment price and total demand, to be used of instruments such as goverment expenditures, taxes and debt management ( Hacholiades, 1994 :624) or " all of fiscal policy instruments that goverment uses to effect the economic running" (Tanzi and Elgar, 1991: 14 ).
In another definition it is considered the fiscal policy as; " in an economy, whole necessary regulations regarding in goverment expenditures and taxes" ( Ataç, 1991:27) and it is definited such as; "the fiscal instruments which goverment holds, are to be used for protection of stabilized economic framework which is purified from cyclical fluctuation and for obtain the price stability, full employment, economic growth and development, redistribution of income and worth .
Consequently, goverment's interference to the economy is via fiscal policy, here the goverment aims to obtain optimum resource allocation, economic stability, payment balance and equal income redistribution ( Coíkun, 1988:28 ). To achive these goals in the economy, goverment benefits from goverment expenditures, incomes, depts and budget as fiscal policies.
The fiscal policy, mainly, has been run by goverment budget, both the quantity and composition of public expenditures and incomes, and budget deficit or surplus are the important instruments of which the goverment can use to achieve the goal of fiscal policy to obtain the stability.
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In economic stability, the functions of public expenditures are; when the inflation dominates trough economy, to equal the total demand to total supply at full employment level, if economy is on balance, to protect this balance, on the contrary if economy is in deflation, to make the demand mass the good and services which economy produced at full employment level.
The tax policies, existing to decrease the demand in short term and to increase the supply in long term in inflation fighting, stimulate the productive investment to support the development, discipline the consumption and give way to applications those forefront the tax rebates, exemptions and exceptions to rise the economy in deflationary period.
A. Model Definition
In this study, it is examined the efficiency of fiscal policy to obtain the economic stability. It is a well-known case that the public finance, in economy policy, is one of the instruments which is most affected by political criterions ( Atiyas, 1996:16 ) and that the politicians can increase the goverment expenditures rather than the resources because the factors such as vote concerns etc in overcompetitive case. And this causes to public deficits and financial problems.
Turkish economy is taken to a vicious circle that is caused by high inflation. Because the inflation is very high, in public borrowing, nominal and real interest rate while is being so high, the borrowing term is very short. By the increasing of interest rate, public deficits rise and cause the inflation rate stands at high level ( Kumcu, 1998:18 ).
It is known that the inflation reduces the real value of public borrowings (McMillin, 1986:257-269). However, with this logic, it can't deduce the consequences that the public depts are melt in the course of time, consequently, that increasing of public borrowing is an affirmative policy in inflationary periods. Because, at one side the chronic inflation decreases the public incomes, at the other side prevents the reduction of public expenditures. Under those conditions, the public sector borrowing from continuously increasing market interest rate; get into interest- budget deficit-borrowing and interest burden spiral (Önder vd, 1993:42).
Among main reasons of PSBR (Public Sector Borowing Requirement) which is the one important issue of Turkey, are economic intervention of goverment and excessive extent of public sector, rapidly population growth rate, underdevelopment and savings gap because goverment determines development rate become high, present of non-financial public enterprises, inconsistency between tax system and socio-economic status ( Akalin, 1994:5).
In a study ( Akat, 2000: 265-282) where maintianed that the high inflation prevents public sector having a wide dimension, it is stated that high inflation rate worsens income inequalities further, rises the unemployment rate in urban and rural areas and along this process, causes an erosion on society's moral and ethic values in last two decades, in Turkey.
Furthermore, the hypothesis would be advantageous for economic development, is refused by empirical findings (Fisher, 1996:34)and; economic results has shown that there is a negative corelation between inflation rate especially with double digit and economic growth.
There are some studies which show there is an affirmative relationship between interests and budget deficit in a literature ( Dua and Arora, 1995:23-31), (Ewing and Yanochik, 1997:199- 201), (Cebula, 1999:489-495); suggest the budget deficits are increased due to interests ( Cebula and Saltz, 1997: 19-27) and state the increment in budget deficits which occur because of over- borrowing, would increase the interest rate ( Cebula and Belton,1993:188-209 ).
Continual increasing public deficits have significantly limited the benefits from liberalization and extrovert of economy. Especially, entering of public policy into an expansionary tendency contrary to expectations, causes to occur an unstable structure based on domestic demand and the increased price increments to become chronic.
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In an amprical study ( Özmen and Kogar, 1998:107-127), which is done about sustainability of budget deficits in our country where we are accustomed to chronic budget deficits, it is pointed out that the strong sustainability condition of...
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