Relationship between public borrowing policy and functional distribution of income in Turkiye

ABSTRACTMasters ThesisRelationship Between Public Borrowing Policy and Functional Distribution ofIncome in TurkiyeH. Barış KAYRAKCIDokuz Eylul UniversityInstitute Of Social SciencesDepartment of EconomyWith the idea of social state that has recently emerged and developed, theresponsibilities and duties of the state have proliferated. As a consequence, therehave been both diversity and proliferation in the services that the state isobligated to provide. Moreover, the increased public services caused a rise inpublic expenditure and so financing public expenditures have gainedimportance. Borrowing policy of public sector creates perpetuating impacts onthe economy.The distribution of income is a remarkable indicator for social welfarelevel. A fair distribution in the national revenue shall ensure the alleviation ofsocial problems. Because it is a clearly known fact that the internal balanceestablished between the social portions of a community could make significantcontributions to social cohesion, the functional distribution of income has animportant place in the analyses on income distribution.The primary objective of the study is to determine how public borrowingpolicies have affected functional distribution of income. The Central Bankresources have been an important tool for internal borrowing between 1963 and1979; however, this has also caused rise in the issuing, which triggered asimultaneous rise in the inflation rate as well. Between 1980 and 1989, switch topositive real interest rate, rise in the demand for funds caused by the finance ofpublic external debts by internal debts led the public authority to the borrowingunder short-time and high interest rate. This caused an increase in the debtstock and created a vicious cycle. Between 1990 and 2005, having been unableto resolve its structural problems, and sought the resolution of those problemsin short-term speculative foreign capital, the Turkish economy has becomesensitive to the negativities both inside and outside the country. There havebeen heavy financial crises at various times and particularly the problems thathave been overlooked in the finance sector have created a substantial burdenover the public authority. In general, the popular groups with fixed and low-income have negatively been affected by the policies followed. With the financialliberalization that has begun in 1980, the income distribution has been putunder the control and direction of monetary economic relations, rather thanreal economic relations. The delay in the institutional reconstruction and legalinfrastructure has impacted on this negative process.Affected by the recent crises, the public debt stock rose in our country.Even though the debt stock has become manageable through the followedprograms, the analytical findings demonstrating that income distribution havebeen negatively affected necessitates the development of more efficient andinfluential policies by the decision-makers.Key World : 1)Income Distribution, 2)Functional Income Distribution, 3)PublicBorrowing Policy, 4)Internal Borrowing, 5)External Borrowing