Effects of budgets deficits on macroeconomy in Turkey

uı ABSTRACT Today public sector's financial deficits in many economies have been observed. Ratio of deficit to Gross National Product (GNP) is quitely high, particuarly in developing countries. Thus, budget deficits have been evaluated as one of the most important reason or source for economic instability problem. It is important to know the economic effects of budget deficits at this point. The effects of budget deficits have been becoming an issue for many quantitative studies in both grounds, to form some economic policies and to show the way of discussions in economic theory. In the first part of this study, the discussions about budget deficits were studied. The problem of budget deficits in economic theory was dealt with as regards economic schools. For this purpose, the therotical models about public deficits which had been brought up by Keynesian, Neo-Classical and New Classical economics were discussed. Because reasons and effects of public deficits are related to countries' economic structures; in the second part, revenue and expenditure of Turkish public sector were studied. Finally, the effects of public deficits in Turkey have been tried to bring up through an econometric model and statistical technics. In this study, it is proved that the budget deficits in Turkey have been related to main economic indicators like inflation, interest rate, and balace of payments.