The relationship between public spending and economic growth in financial crisis periods: The case of Turkey 1998-2018

Within the globalization process, the tasks assigned to states have differentiated in the structural and functional basis. This change has initiated some debates on public expenditures. In terms of both political and economic stability, the importance of public expenditures in an economy is an undeniable fact. The state has great responsibilities to ensure economic growth and increase social welfare. Thus, the correction of long-term fluctuations in the economy by the state reveals the importance of public expenditures. The purpose of this study is to analyze the effects of public expenditures on economic growth in Turkey in the short and long run. Relationship between public expenditures and economic growth in Turkey for the periods of 1998-2018 were examined using ARDL (Autoregressive Distributed Lag) Bounds Test Approach with quarterly data. In the study, it is found that public expenditures increase during financial crises. Besides, the findings indicate that there is a cointegration relationship between public expenditures and economic growth in the short and long run. The positive impact of public expenditures on economic growth is only possible whether the proper use of the sources.