THE RELATIONSHIP BETWEEN PUBLIC SECTOR REVENUES AND EXPENDITURES IN TURKEY

Abstract

Since the 2008 financial crisis, the topic about the relation of public revenues on the expenditures in affecting fiscal sustainability has received particular attentions by several economists. For this reason, it is necessary to investigate revenue and expenditures relationship for Turkey. In this paper, the empirical relationship between two variables has been investigated by providing econometric models. First, we employed classic and structural break unit roots. After determining the level of unit root of mentioned series, the study found evidence of a cointegration relation between the government revenues and expenditures by employing Bounds test approach. Then, ARDL method was used with the aim of examining the short and long-run coefficients of co-integration relations. According to Bounds Test results, two variable was found to be a cointegrated. The findings of the ARDL method revealed that the change in public sector revenues have significant impact on public sector expenditures. This study provided the evidence of financial sustainability of expenditures with government revenues which can be supported the concept of fiscal sustainability in Turkey.