Investigation of The Relationship of Tax Revenues and Government Expenditures in Turkey: Evidence by Fourier Approaches (Türkiye’de Vergi Gelirleri ve Kamu Harcamaları İlişkisinin Araştırılması: Fourier Yaklaşımları ile Kanıtlar)

Abdullah Emre Caglar and Ersin Yavuz
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Abdullah Emre Caglar: Ataturk University
Ersin Yavuz: Pamukkale University, Faculty of Economics and Administrative Sciences, Department of Public Finance

Business and Economics Research Journal, 2022, vol. 13, issue 4, 657-669

Abstract: The aim of the study is to test the validity of tax-spend, spend-tax, fiscal synchronization, and institutional separation hypotheses in the relationship between tax revenues and government expenditures in Turkey for the period 1975-2021. In analysis, Enders and Lee (2012) ADF type Fourier unit root test, Tsong et al. (2016) Fourier cointegration approach, DOLS estimator, and Nazlioglu et al. (2016) Fourier Toda-Yamamoto causality test is applied. As a result of the analysis, the Fourier cointegration approach reveals that there is a cointegration relationship between the variables in the model where tax revenues are the dependent variable. According to the DOLS estimator, a 1% increase in government expenditures positively affects tax revenues by 0.66%. The causality findings provide evidence that there is unidirectional causality from government expenditures to tax revenues. As a result, the findings indicate that the expenditure-tax hypothesis is valid in the examined period. Therefore, governments should focus on government expenditures in order to balance the budget.

Keywords: Tax Revenues; Government Expenditures; Fourier Causality; Fourier Cointegration (search for similar items in EconPapers)
JEL-codes: C23 H20 H50 (search for similar items in EconPapers)
Date: 2022
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