The effects of budget deficits on major macroeconomic variables: The example of Turkey

In this study, the effects on macroeconomic variables selected major budget deficits in Turkey were examined. The effect of budget deficits on variables such as current account balance, M3 money supply and GDP, 2006Q1-2020Q2 quarterly data were obtained and research was conducted on selected variables.In the study, the stationarity levels of the data were determined by perron 1997 unit root test with structural break, and ADF (Agumented Dickey Fuller) and Philisps Perron conventional unit root tests. Then, the cointegration relationship between variables was examined with the ARDL boundary test. Finally, the existence and direction of causality between variables were determined with Toda patented causality test.According to the results of the unit root tests, it is understood that the variables are stationary at different levels. In addition, the cointegration relationship was proved according to the ARDL limit test procedure in three different regression models established to examine the effect of budget deficits on selected macroeconomic variables.According to the Toda yamamato causality test, there is a two-way causality relationship between the bend deficits and the current account balance, while a one-way causality relationship from GDP to the budget balance is determined. In addition, there is a one-way causality relationship between M3 money supply and current account balance. Keywords: Budget Deficits, Macroeconomic Variables, GDP, Current Account Deficit, M3 Money supply, Toda Yamamato Test, ARDL Bounds Test