Optimization of Turkish Macro Econometric Fiscal and Monetary Policies for Growth

Abstract

Financial and monetary policies are aiming to increase production growth and keeping inflation and unemployment at a minimum. However, the complex interactions between economic variables and the range of economic instruments complicate to obtain these goals. In addition, the economical and behavioural habits of the society and the market economy structure of the nation force the state to choose among the policies. In this context, it is necessary to understand the characteristics of behavioural economics beside the theoretical issues. As, 5-Yearly Development Plans were used for national economic planning, which is used for the purpose of establishing economic policy, the model based Macro-Turkey program was used during a short period. Today, the General Directorate of Economic Modeling and Strategic Studies "Medium Term Program Key Macroeconomic and Financial Targets" reports make proposals for economic policy making and development. The aim of the work is to estimate and compare the fiscal and monetary policy model of Turkey. The research question considers also the recession periods after 2008-2009 international crises. Some governments had forcefully recourse fiscal policies to overcome the recession. There was a wide consensus that the financial markets had played a decisive role in the current economic problems. A quarterly 2006-2017 data was collected with 44 observations, which includes consumer price inflation 2003 constant prices, policy interest rate, broad money, central government spending, gross fixed capital formation, GDP with constant prices, tax revenues, gross external dept. Dynamic equation system estimates