Countercylical and procylical fiscal policy: An applied analysis on European Uninon member countries and Turkey

With its history dating back to the 18th ceuntry, theory of business cycle and fiscal policy, which takes it's theoretical foundations from Keynasian economic thought, constitutes two important research areas that continue to be intensively investigated in today's economic literature. Business cycles, with its broadest definition, can be expressed as a set of theories developed to explain the instability in total economic activity. Fiscal policy, on the other hand, can be described as the sum of theories that examine the method, tools and timing of the state's intervention to the instabilities observed at the level of total economic activity with positive and normative perspectives of economic approaches. The relationship between the this two concepts was first tried to be examined by Gavin and Perotti (1997) with empirical analysis methods. After this inspiring study to examine the relationship between fiscal policy and business cycles, a rapidly developing and diversifying research field has began to emerge in the economics literature. This reasarch area, which tries to examine the connection between business cycles and fiscal policy; It includes significant theoretical and empirical diversity, along with heterogeneous country groups, different data set length, econometric method, variety of preferred variables, and advanced estimation methods. In addition, together with the detailed examination of the development process of the theoretical ideas about business cycles, the cumulative progress of the ideas belonging to the schools of economic thought can be easily observed. In this context, what is expected from the interventions made through fiscal policy is to direct the unstable fluctuations observed in total economic activity towards the stable equilibrium point, that is, the long-term equilibrium position. Keynesian thought argues that it is possible for fiscal policy to create this expected effect with the implementation of countercyclical fiscal policy. However, there are strong arguments that fiscal policy will also have ineffective results if it is designed in an countercyclical manner without taking into account the sensitivities inherent in the current instability in the overall level of economic activity. With in the scope of this study, the cyclical behavior of fiscal policy applications in the 2000-2020 period in the European Union member countries and in the 1990-2020 period in Turkey were tried to be analyzed by dynamic panel data analysis and time series analysis methods, respectively. The analyzes indicate that there are countercyclical fiscal policy practices in Turkey and procyclical fiscal policy practices in European Union. It has been tried to determine the strengths and weaknesses of the fiscal policy in the European Union and Turkey in a comparative manner from the results obtained.