Panoeconomicus 2014 Volume 61, Issue 6, Pages: 631-651
https://doi.org/10.2298/PAN1406631S
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Crowding-out or crowding-in? Analyzing the effects of government spending on private investment in Turkey
Şen Hüseyin (Yıldırım Beyazıt University, Faculty of Political Sciences, Department of Public Finance, Ankara, Turkey)
Kaya Ayşe (İzmir Kâtip Çelebi University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Izmir, Turkey)
The main objective of this paper is to analyze empirically the effects of
government spending on private investment, evaluating the existence of
crowding-out/-in effects, in Turkey for the 1975-2011 period. In contrast to
previous studies, we employed in the paper the modified version of David A.
Aschauer’s (1989) model, which allows us to see the effects of each component
of government spending taking place in the Turkish budget system. The
empirical findings of the paper showed that government current transfer
spending, government current spending, and government interest spending
crowdout private investment, whereas government capital spending crowds-in
private investment in Turkey.
Keywords: Government spending, crowding-out, crowding-in, private investment, fiscal policy, Turkey