The relationship between public expenditures and components and economic growth in Turkey: 2006:1-2021:4 period

The increase in public expenditures has been one of the issues that have been emphasized since the past. Increases in public expenditures have been attributed to various reasons and different opinions have been put forward on this. The most striking of these views is the view of the German scientist Adolf Wagner. Wagner argued that the increase in public expenditures with the "Public Expenditure Increase Law" depends on the economic development of the countries. In other words, he argued that the increase in public expenditures in an economy follows the economic development. In summary, Wagner sees economic growth as the cause and the increase in public expenditures as a result of this development. On the other hand, there is the Keynesian Approach, which argues that the increase in public expenditures positively affects economic growth. According to this approach, the state cannot produce the education that the private sector cannot produce. It makes expenditures such as health, infrastructure and social security and these expenditures affect economic growth positively by creating positive externalities. In short, the Keynesian Approach sees the increase in public expenditures as the cause and economic growth as a result of these expenditures. These two diametrically opposed views have found a wide area in both foreign and domestic literature. Since different time periods and different econometric methods are used in studies on the relationship between public expenditures and economic growth, the result are also different from each other. The aim of this study is to test the relationship between public expenditures and economic growth with the Engle-Granger cointegration test, error correction model and Granger causality test, using quarterly data for the period 2006:1-2021:4 in Türkiye. The variables used in this context are current, transfer, investment, defense, expenditures, expenditures, social protection,and total public expenditures and Gross Domestic Product (GDP), and the relationship of each of the variables with GDP is examined separately. According to the Engle-Granger cointegration test results, total, transfer, current and social protection expenditures and economic growth variables move together in the long run. Findings from the error correction model indicate that the Keynesian hypothesis is confirmed for total and current expenditures both in the short and long run; It also shows that Wagner's and Keynesian hypotheses are valid in the short and long run, respectively, for transfer expenditures. For social protection expenditure, Wagner's hypothesis is confirmed in the short run, and both Wagner's and Keynesian hypotheses are in the long run. According to the Granger causality test results, it was determined that the Keynes hypothesis is valid for education and investment expenditures in the short run.