Prague Economic Papers 2016, 25(5):607-616 | DOI: 10.18267/j.pep.577

Is There Any Time-Varying Relationship between Fiscal and Trade Deficits in Turkey?

Bariş Gök1, Abdurrahman Nazif Çatik2
1 Ege University Department of Economics, Bornova, Izmir, Turkey (baris.gok@ege.edu.tr).
2 Ege University Department of Economics, Bornova, Izmir, Turkey (a.nazif.catik@ege.edu.tr).

In this article we analyse the evolution of the relationship between budget and trade deficits in Turkey covering the period 1985:1 to 2013:4. The structural break tests suggest the existence of a regime shift after the severe 2001 crisis. Time-varying responses obtained from the TVP-VAR model up to 2003 support the Keynesian view by providing evidence in favour of twin deficits, whereas the remaining responses suggest the remarkable divergence between fiscal and trade deficits.

Keywords: Turkey, TVP-VAR model, current account, budget account
JEL classification: C32, F32, H30

Published: January 1, 2016  Show citation

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Gök, B., & Çatik, A.N. (2016). Is There Any Time-Varying Relationship between Fiscal and Trade Deficits in Turkey? Prague Economic Papers, 25(5), 607-616. doi: 10.18267/j.pep.577
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