The Sustainability of Budget Deficit in Turkey: Hidden Cointegration Relationship

This study, starting from the point of intertemporal budget constraint approach, examines the sustainability of budget deficit in Turkey for 1930-2016 period by taking Quintos (1995)'s strength and weakness conditions for the sustainability of the budget deficit and Hakkio and Rush's (1991) approach to how to ensure the sustainability of the budget deficit. In this study, the cointegration relationship between the budget revenues and expenditures is tried to be revealed through the Johansen Cointegration method and the Hidden Cointegration Method developed by Hatemi-J and Irandoust (2012) based on the prior method. Cointegration coefficient is estimated by FMOLS, DOLS, CCR. Results indicate that there is a cointegration relationship between budget revenues and budget expenditures and the budget deficit is sustainable even in weak form in Turkey.