FISCAL CROWDING OUT: ARDL BOUND TEST 1975 - 2016 PERIOD FOR TURKEY

Abstract

States meet their funding needs by borrowing for various reasons. Public borrowing has a significant difference compared to others. This is the interest payment in return. One of the problems of public borrowing is that the resources used by the private sector decrease and / or increase the cost of these resources. This problem is called fiscal crowding-out effect. In this study, it is tested the long-term relationship between the public sector borrowing requirement and debt payments and the private sector investment expenditures in Turkey for 1975 - 2016 period. Cointegration analysis is performed with ARDL model, Toda - Yamamoto is used for causality. The existence of a long-term relationship has been detected. Private sector investments are negatively affected by KKBG and domestic debt payments. In the error correction model the equation is stable and the short-run equilibrium state is observed. Causality analysis shows that causality is established between variables.