Supply Side Economics Approach Validity Against Ricardo-Barro Hypothesis in Turkey

Emek Aslı Cä°nel

Fiscaoeconomia, 2021, issue 1

Abstract: It is quite common opinion that the choice of public borrowing in financing public deficits will lead to an increase in wealth in the private sector. The rise in private wealth will lead to an increase in private sector spending and an increase in the general level of prices, production volume and interest rates. The Ricardo-Barro Hypothesis presents a different perspective to the economy from this view and argued that the taxes should be increased so that the borrowing realized to finance the budget deficit as a result of the change in taxes can be paid with interest in the upcoming period. In other words, the borrowing made today (tax cut) represents the future tax increase. The Supply Side Economy Approach suggests that the tax rates should be lowered in order to increase the production volume and emphasizes that in this way, prices will decrease as well as production increase and production will be cheaper. The Supply Side Economy Approach, which asserts that more total tax revenues will be obtained through tax reductions, also advocates for the reduction of public expenditures, restriction of money supply and the creation of capital accumulation in the private sector by weakening market interventions. The aim of the study hypothesis against Ricardo-Barro Supply-Side Economics Approach to determine whether it is valid in Turkey and argued that the effects of which of these approaches is to identify that create more emerged in Turkey.

Keywords: Ricardo-Barro Hypothesis; Supply Side Economics Approach; tax (search for similar items in EconPapers)
JEL-codes: B12 E51 G51 H62 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:210107

DOI: 10.25295/fsecon.792353

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