Budget Deficits and Inflation: Evidence from Turkey

Erkam S., Çetinkaya M.

The Macrotheme Review, vol.3, no.8, pp.12-22, 2014 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 3 Issue: 8
  • Publication Date: 2014
  • Journal Name: The Macrotheme Review
  • Journal Indexes: Index Copernicus
  • Page Numbers: pp.12-22
  • Hacettepe University Affiliated: Yes

Abstract

This study attempts to investigate the presence of causality between budget deficits and inflation rate. For this purpose, Granger-causality tests are employed on monthly budget deficit and inflation data of Turkey which covers two sub-periods namely, (1987:M1- 2003:M6) and (2005:M1-2013:M6). The results indicate a positive significant causality running from budget deficits to inflation rate during the high inflation period (1987:M1- 2003:M6). This causal link disappears during the low inflation period (2005:M1- 2013:M6).