Crowding-out or crowding-in? Analyzing the effects of government spending on private investment in Turkey

• Published in: Panoeconomicus Vol. 61; no. 6; pp. 631 - 651
• Main Authors: Sen, Hüseyin, Kaya, Ayse
• Format: Journal Article
• Language: English
• Published: Novi Sad The Associations of Economists of Vojvodina 01-01-2014; Economists' Association of Vojvodina
• Subjects: Budget deficits; Capital; Capital expenditures; Cointegration analysis; Consumption; crowding-in; crowding-out; Crowding-out effect; Developing countries; Economic models; Economics; Effects; Employment; Evaluation; fiscal policy; Government; Government and politics; Government spending; Interest rates; Investment; Investments; LDCs; Literature reviews; private investment; Public expenditure; Public finance; Studies; Turkey; Turkey
• ISSN: 1452-595X; 2217-2386
• DOI: 10.2298/PAN1406631S

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.
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