The analysis of the political business cycles in Turkey

Researches of political business cycles, in which the effects of political processes and preferences causing instability on economic magnitudes are discussed, are important in terms of revealing the negative effects of politics on the economy, and these researches allow developing policy implications to eliminate these effects and make possible to build a stable economic structure. In this context, political business cycle theory which is based on the idea that short-term cyclical movements in the economy may be the result of political decisions, processes or preferences, focuses on the economic consequences of the interactions between politicians and voters in a democratic system where political authorities are assigned through periodic elections. In this study, the presence of political business cycles in macroeconomic outputs and policy instruments was investigated depending on the general elections held in Turkey during the multiparty period. In the econometric analysis which was carried out with data from 1950 to 2016, changes in the existence and direction of cycles were investigated due to the economic developments, such as crises, development strategy change and the central bank independence, as well as the presence or absence of the minimum conditions of the electoral democracy in multiparty period in Turkey. Findings of the analysis reveal that political business cycles have been experienced in macroeconomic outputs and policy instruments during the multiparty period in Turkey. According to these findings, the traces of the political business cycles in macroeconomic variables have been observed mainly during the years when the minimum conditions of electoral democracy have been met and the post-1980 period when the export-oriented growth strategy has been adopted. The findings obtained from the analysis of the indicators of monetary policy presents that the monetary cycles which have been determined due to the elections held before the year 2001 when legal independence of CBRT was ensured, have disappeared after this year. The findings indicate that the policy instruments used in the manipulation of monetary aggregates differ depending on the presence or absence of the minimum conditions of electoral democracy. Findings of the analysis in terms of fiscal policy instruments reveal that political business cycles were experienced in both total budget expenditures and in the sub-expenditure groups forming the total expenditures and in the budget balance depending on the elections held during the multiparty period.