A Fiscal Space Analysis In Terms Of Turkey’s Domestic Debt

Abstract

Restrictions on the use of fiscal policies due to high levels of public debt have affected the fiscal spaces of many countries. In consequence, these countries had to adopt structural economic reforms to create a fiscal space. Fiscal policies adopted in the 2000s has created different results in Turkey than they did in other developing countries. These policies subsequently yielded huge reductions in budget deficits, public debt ratios and interest payments, which have enabled Turkey to create the fiscal space needed. Within this framework, after providing a definition for fiscal space, we calculated Turkish fiscal space for the period between 2000:Q1-2015:Q4. Our estimates suggest that although there is ample fiscal space for Turkey to use fiscal policies, increasing public debt might restrain using such policies and cause fiscal fatigue.