Cansın Kemal CAN
Siyasal Bilgiler Fakültesi Dergisi (İSMUS), IV/2 (2019), s. 1-22
According to Tanzi and Schuknecht (1997), the welfare states are characterized by large and ever-mounting fiscal deficits and public debt. Due to their shallow fiscal spaces, the developing countries jeopardize their fiscal stability once they opt for running welfare state policies. This study gauges the degree of fiscal vulnerability in Turkey from a welfare state perspective and aims to appraise the posture of fiscal stability under welfare state policies by means of fiscal fragility index and causality analyses. Overall, the results indicate that despite exhibiting welfare state characteristics, Turkey’s fiscal stance does not reveal high levels of fragility. The analysis of the fiscal fragility index indicates that the level of fiscal vulnerability is time-varying and during the 90s surges in the social expenditures coexist with rising fiscal vulnerability, whereas during 2000s, the despite considerable upward movements in social spending, the index value does not imply a deterioration in fiscal fragility apparently thanks to prudential policies during the period. Also, causality test results reveal that there is unidirectional causality from required primary balance to real primary balance indicating that the primary balance is used actively to restore fiscal stability. Nevertheless, in recent years, the index value exhibits a rising trend signalling a worsening fiscal posture which might entail an overhaul for the welfare state policies.