Crowding-Out or Crowding-In? Analyzing the Effects of Government Spending on Private Investment in Turkey

  • Hüseyin Şen Yıldırım Beyazıt University, Faculty of Political Sciences, Department of Public Finance, Ankara, Turkey
  • Ayşe Kaya İzmir Kâtip Çelebi University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Izmir, Turkey

Abstract

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 crowd-out private investment, whereas government capital spending crowds-in private investment in Turkey.


Key words: Government spending, Crowding-out, Crowding-in, Private investment, Fiscal policy, Turkey.
JEL: E62, H54, H72, R42.

How to Cite
Şen H., & Kaya A. (2014). Crowding-Out or Crowding-In? Analyzing the Effects of Government Spending on Private Investment in Turkey. Panoeconomicus, 61(6), 631-651. doi:10.2298/PAN1406631S
Section
Original scientific paper