Analysis of relationship between inflation and tax revenues in budget deficits in terms of Turkish economy

Nowadays, budget deficits and inflation are among the most important macroeconomic problems for countries. In terms of developed and developing countries, these two problems bring about other economic instabilities. For this reason, the reasons for budget deficits, financing methods and the relationship between inflation and the phenomenon of inflation are becoming an important research subject. The other subject matter for the countries is the taxes. Taxes are an important economic element that is used both as a public finance and a fiscal policy instrument. It is considered beneficial to take tax revenues as part of the study. Thus, the relationship between inflation, budget deficits and tax revenues was tried to be determined. Based on the VAR model, impact response analysis and variance decomposition calculation were used. The study is based on the monthly time series analysis of the period 2000-2018. The data set was obtained from the Central Bank's EVDS database. Inflation dependent variable, budget deficit and tax revenues were accepted as independent variables and the effects of these independent variables on the dependent variable were analyzed. As a result, it is determined that there is a mutual interaction between inflation, tax revenues and budget deficits. Keywords: Budget Deficit, Inflation, Taxes