The analysis on the relation between public expenditures with economic growth: Turkey

This study has evaluated the causality between public expenditures and economic growth within the frame work of Wagner's Law and Keynes's Hypothesis, by putting forth the development of public expenditures in Turkey fort he period of 1980-2010. It was aimed to put forth the importance of public expenditures for the Turkish economy through investigating the relations of public expenditures with economic growth by using the models towards Wagner's Law. In this study, the classification of public expenditures and the reasons of public expenditures increasing are assessed. The growth performance of Turkish economy is evaluated in the framework of theories related to public expenditures along with the concept of economic growth and economic growth models. In study econometric analyses are performed by using public expenditures and GDP annually. In this context, relationships between these variables are revealed by using ADF unit-root test, Toda and Yamamoto causality test and dynamic least squares method. Analyses are performed in the context of models of Peacock-Wiseman, Goffman-Mahar, Gupta-Michas, Mann and Payne-Ewing which consider Wagner's Law. As a result of analyses, a causality relation was not found between public expenditures in terms of Peacock-Wiseman model and although the Wagner's Law and Keynes's Hypothesis are valid in Turkish economy with regrad to other four models, Wagner's Law is more prevailing than Keynes's Hypothesis. In this context, as well as the areas in which the public resources invest, Turkish economy's adjustment to developments and transformations in the world economy; in other words, economic policies that should be developed during the transformation process to information society and information economy are examined. Keywords: Public Expenditures, Wagner's Law, Public Expenditure Policy