The growth of public expenditure in Turkey, 1950-1990 (macro-models)

This thesis investigates statistically the existence of a long-run relationship between public expenditure and GNP (Wagner's Law) using data for Turkey over the period 1950-1990 and examines whether there is a structural break in the public expenditure series as a result of the 1974 Cyprus War (Peacock and Wiseman's Displacement Effect Hypothesis).;In the public finance literature several models have been used to explain public expenditure growth. For example, macro models such as Wagner's Law, Peacock and Wiseman's displacement effect hypothesis, and microeconomic (or decision process) models of public choice.;This thesis concentrates on macro models. These models try to explain the time pattern of public expenditures relative to broad aggregate variables such as GNP. In terms of macro models, the most prominent empirical generalisations about public expenditure growth are Wagner's Law and the Displacement Effect Hypothesis.;Recent developments in time series analysis, such as cointegration analysis, investigate long-run relationships between variables, which allow us to apply news tests to Wagner's Law. Using the Eagle and Granger cointegration test and Turkish time series aggregate data for the period 1950-1990, we find no empirical support for Wagner's Law. Recent advances in times series analysis allow us to test for the existence of a structural break in the series for public expenditure arising from the 1974 Cyprus War. The results do not support the existence of a displacement effect hypothesis due to the Cyprus War.;Using disaggregated data (public expenditure by economic and functional categories), Engle-Granger cointegration and causality test results provide some evidence in favour of Wagner's Law.;Finally, a synthetic approach encompassing various theories of public expenditure growth (e.g. Wagner's Law, displacement effect hypothesis, demographic variables, relative prices and some dummy variables for country specific conditions) has been used to model public expenditure growth. The results provide some new evidence for Turkey.