Evaluation of fiscal balances in the framework of inflation, external balance of payments and exchange rate variations: The case of turkey

Fiscal balance, inflation rate, balance of payments and exchange rate that are among the basic economic indicators, have long been unresolved problems in the Turkish economy. When the economic history of Turkey is analyzed, it seems that when the problems in these indicators exceed a certain level and have an impact on each other, the economy is dragged into a crises or the problems deepen during crisis periods. In the crises that occured in the country's economy, although the steps taken to solve the problems contributed to the recovery of the economy for a certain period of time, a permanent stability environment couldn't be created in the economy. For this reason, this study investigates the effect of inflation rate, Exchange rate change and current account balance on fiscal balance and the effect of fiscal balance, inflation rate and Exchange rate change on current account balance. The aim of the study is tested through two different models using the annual data of Turkish economy for the period 1990-2023, using NARDL analysis. The choice of 1990-2023 as the research period is based on the fact that it covers the crises that occured in the country's economy and the use of annual data is based on the fact that the data on the generel balance of public sector is published annually. Since the Ziwot-Andrews unit root test with structural breaks revealed the presence of structural breaks and the BDS test revealed that the time series were nonlinear, the NARDL methodology was chose. The findings of the study reveal the existence of a cointegration relationship between variables in the long run and also that positive and negative shocks of independent variables, except for exchange rate changes, have an impact on the fiscal balance in the first model, while negative and positive shocks of all independent variables have an impact on the current account balanace in the second model.