Effects of fiscal policy uncertainty on Turkish economy
Effects of fiscal policy uncertainty on Turkish economy

Summary/Abstract: Uncertainty is one of the most important issues for economic actors. Uncertainty abouttax, expenditure and debt policy has an impact on the economy. The central questionin this study asks how fiscal policy uncertainty affects the Turkish economy. First, wequantify Turkey’s fiscal policy uncertainty index based on volatility measurementsbetween 1998Q1 and 2020Q4. This index represents major fiscal, economic and politicalincidents in Turkey. Next, we analyse the effects of fiscal policy uncertainty on the Turkisheconomy using a VAR model. Our study finds that fiscal policy uncertainty shocks havedetrimental and long-lasting effects on the Turkish economy. The results indicated thata positive standard deviation shock in fiscal policy uncertainty decreases the confidence,output and consumption. The findings of thisstudy reveal critical fiscal policy implicationsfor decision-makers. These findings imply that reducing Turkey’s fiscal policy uncertaintyis a critical policy priority for the business cycle fluctuations

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