WHICH ONE IS RIGHT? MONETARISTS OR KEYNESIANS? THE EFFECTIVENESS ANALYSIS OF THE MONETARY AND FISCAL POLICY FOR TURKISH ECONOMY

Abstract

Author(s): Utku ALTUNZ

The effectiveness of fiscal and monetary policies for economics is one of the main issue which is continuously discussed but could not be arrived at any consensus. As a matter of fact, the essence of the issue is based on the Monetarist-Keynesian debate. Monetarists favor monetary policy while Keynesian favors fiscal policy in the sense of effectiveness. The aim of this paper is to determine the efficiency power of monetary and fiscal policies for Turkish Economy over the period 1992-2016 by using ARDL Bounding Test. For this purpose, GDP -representing economic activity level- M3 money supply -representing monetary policy-, and short term interest rates were involved in the econometrical analysis. As a result of econometric analysis, monetary policy is effective in the short term but not long term however fiscal policy is effective both in the long and short term. Results show that Keynesian approach is relatively much more effective in Turkey.

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