Interaction of Monetary and Fiscal Policies in Turkey: A Dynamic Time Series Data Analysis

Asli Guler
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Asli Guler: Ordu University

Business and Economics Research Journal, 2019, vol. 10, issue 5, 1039-1049

Abstract: Monetary and fiscal policies are designed and implemented by different government agencies, each with its own objectives, resources, constraints, and incentives. The actions of monetary authority may affect the fiscal authority’s public debt management and fiscal deficit. On the other side, the fiscal authority’s action also may affect the stance of monetary policy and its results. This paper aims to find the level of fiscal or monetary dominance by evaluating the interaction of monetary and fiscal policies in Turkey for relevant period. For this purpose, it was examined the relationship between inflation rate, monetary policy interest rate, fiscal deficit, public debt in Turkey for 2000 to 2018 by using VAR and ARDL model. According to the results obtained from VAR analysis monetary variables significantly affect fiscal variables. However, there is no evidence of fiscal dominancy on monetary policy. The evidence acquired via ARDL bound test supports these findings. Hereunder, it can be concluded that monetary policy is dominating fiscal policy in the relevant period.

Keywords: Unpleasant Monetarist Arithmetic; Monetary dominancy; Fiscal Dominancy; Policy Interaction (search for similar items in EconPapers)
JEL-codes: E37 E58 E62 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0441

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