The crowding – out effect of public expenditures on private sector investment expenditures: Analysis of Turkish economy after 1980

The relationship between public expenditures and private sector investment expenditures has been examined for Turkey using annual data for the post – 1980 period. The aim of the study is to find out whether the public sector fixed capital investments will have the effect of crowding out or crowding in on the private sector fixed capital investments in the period 1986 – 2015. In the first part of the study, there is a discussion on public expenditures and the theoretical framework of private sector investment expenditures. In the second part, some economic developments were made in Turkey, both in the public sector and in the private sector. Finally, in the third part, the analysis of the crowding – out effect on the private sector investment expenditures of the public investment expenditures which constitute the purpose of the thesis is formed. The Augmented Dickey Fuller (ADF) unit root test and Phillips Perron (PP) unit root test were performed to test the stability of the series in the study. And than, the Johansen cointegration analysis was conducted to statistically test the long – run relationship betweeneconomic variables. The Least Squares Method (EKKY) was used for testing the significance of the model and coefficance. And finally, the Granger causality analysis was made about the causality relation and direction between the variables. According to the results of the analysis, it was found that the public investment expenditures had a crowding out effect on private sector investment expenditures in the period 1986 – 2015 in Turkey.