Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey

Cemal Ozturk () and Gunsenin Altinkaynak ()
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Cemal Ozturk: Department of Economics, Pamukkale University
Gunsenin Altinkaynak: Department of Economics, Pamukkale University

World Journal of Applied Economics, 2022, vol. 8, issue 1, 1-14

Abstract: This study assesses the asymmetric effectiveness of Turkey's monetary policy and fiscal policy under the inflation targeting regime in the period of 2006-2020. We employed the non-linear autoregressive distributed lag (NARDL) method and Hatemi-J asymmetric causality test with the assistance of the St. Louis equation, which relates the growth in nominal income with the growth in money supply and public expenditures. The NARDL model revealed that an increase in money supply and gross domestic product (GDP) has a positive relationship. On the other hand, a decrease in money supply and government expenditures have no significant relationship with GDP. In addition, Hatemi-J asymmetric causality results showed an asymmetric causality between money supply and GDP. It demonstrates that the money supply in Turkey during the period 2006-2020 is endogenous.

Keywords: St. Louis equation; NARDL; Asymmetric causality (search for similar items in EconPapers)
JEL-codes: C22 E52 E63 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ana:journl:v:8:y:2022:i:1:p:1-14

DOI: 10.22440/wjae.8.1.1

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