The effectiveness of monetary and fiscal policies in Turkey: An analysis for the period 2006-2019

The effectiveness of macroeconomic policies in economic theory is one of the current debates. The reason for this is that the Schools of economics have different views on this issue. In this context, the effectiveness of monetary and fiscal policies was analyzed by using quarterly data for the period 2006-2019 in Turkey. In the implementation section, the dependent variable real gross domestic product, the independent variables monetary policy indicator M2 money supply, fiscal policy indicator tax revenues and fixed capital investment expenditures are observed. Relationships between variables were analyzed with Autoregressive Distributed Lag Bound Test (ARDL) and Error Correction Model (ECM). According to the ARDL analysis results, it was determined that there was a statistically significant long-term relationship between all variables. In this case, monetary and fiscal policy has been effective on the product in the long term in Turkey within the scope of the relevant period and method,. In addition, the effect of fiscal policy on output was determined to be higher than monetary policy. As a result of the ECM, 0.97 of the imbalance determined in the model will be eliminated in each quarter and it has been determined that the model will reach equilibrium in the long term. Within the scope of the policy proposal, it is recommended to take measures to increase fixed capital investment expenditures and to follow expansionary fiscal policies by transforming public revenues into public expenditures.