Investigation of The Relationship of Tax Revenues and Government Expenditures in Turkey: Evidence by Fourier Approaches

Article Information
Journal: Business and Economics Research Journal
Title of Article: Investigation of The Relationship of Tax Revenues and Government Expenditures in Turkey: Evidence by Fourier Approaches
Author(s): Abdullah Emre Caglar, Ersin Yavuz
Volume: 13
Number: 4
Year: 2022
Page: 657-669
ISSN: 2619-9491
DOI Number: 10.20409/berj.2022.395
Abstract
The aim of the study is to test the validity of tax-spend, spend-tax, fiscal synchronization, and institutional separation hypotheses in the relationship between tax revenues and government expenditures in Turkey for the period 1975-2021. In analysis, Enders and Lee (2012) ADF type Fourier unit root test, Tsong et al. (2016) Fourier cointegration approach, DOLS estimator, and Nazlioglu et al. (2016) Fourier Toda-Yamamoto causality test is applied. As a result of the analysis, the Fourier cointegration approach reveals that there is a cointegration relationship between the variables in the model where tax revenues are the dependent variable. According to the DOLS estimator, a 1% increase in government expenditures positively affects tax revenues by 0.66%. The causality findings provide evidence that there is unidirectional causality from government expenditures to tax revenues. As a result, the findings indicate that the expenditure-tax hypothesis is valid in the examined period. Therefore, governments should focus on government expenditures in order to balance the budget.

Keywords: Tax Revenues, Government Expenditures, Fourier Causality, Fourier Cointegration

JEL Classification: C23, H20, H50

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