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Growth enhancing effect of discretionary fiscal policy shocks: Keynesian, Weak Keynesian or Non-Keynesian?

Şen, Hüseyin and Kaya, Ayşe (2015): Growth enhancing effect of discretionary fiscal policy shocks: Keynesian, Weak Keynesian or Non-Keynesian?

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Abstract

Using the extended version of the Blanchard and Perotti SVAR technique, this paper attempts to empirically predict the growth enhancing effect of discretionary fiscal policy shocks in both short- and long-run in Turkey over the period 2006:Q1-2015:Q1. Unlike previous studies which have mainly focused on fiscal policy instruments - taxes and government spending - at the aggregate level, this paper considers these instruments at the component level, and then attempts to analyze comparatively the effect of changes in each component on growth. The findings of the paper show that growth enhancing effect of discretionary fiscal policy shocks varies according to its components. However, discretionary fiscal policy shocks at the component level indicate mixed results. In the short-run, only the shocks to government spending have a Keynesian effect. In all other cases, discretionary fiscal policy shocks seem to capture a weak Keynesian and/or non-Keynesian effect in the case of Turkey.

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