Tesng Twn Defcs and Savng-Invesmen exus n Turkey [ FIRST DRAFT] Absrac Ths paper provdes fresh evdence on he valdy of wn defc and he Feldsen-Horoka hypoheses for Turkey durng he perod of 1987-004 usng bounds esng approach o conegraon. In order o explan he man deermnans of he curren accoun defcs n he long-run, he fscal balance and he domesc nvesmens are used n an economerc model.the conegraon ess ndcae he presence of a long-run relaonshp beween he curren accoun and budge defcs as well as he domesc nvesmens durng he esmaon perod. As a resul, s concluded ha he wn defc hypohess and he Feldsen-Horoka puzzle are presen and Turkey appeared o be negraed n he world capal marke wh a low degree of capal mobly as less han 1/5 of s domesc nvesmen s fnanced hrough exernal funds. The augmened Granger-causaly ess sugges no causaly beween he curren accoun and budge defcs, boh n he shor-run and he long-run. The pos-sample varance decomposons sugges ha he domesc nvesmens are he man cause of curren defcs n he long-run. The paper also dscusses he polcy mplcaons of he emprcal resuls. Keywords: wn defcs, Feldsen-Horoka hypoheses, conegraon, Turkey JEL Classfcaons: C, F3, F36 Correspondence o: Ferda HALICIOGLU Deparmen of Economcs, Yedepe Unversy, Isanbul, 34755 Turkey fhalcoglu@yedepe.edu.r Co-auhor Kasm ERE Deparmen of Economcs, Yldz Techncal Unversy, Isanbul, 34349 Turkey erenk@yldz.edu.r 1
1. Inroducon In recen economc leraure, a new research neres has emerged, suggesng ha boh he wn defcs and Feldsen Horka hypoheses may be used o explan he long-run deermnans of curren accoun mbalances. Fdrmuc (003) has ponoreed hs new drecon of research provdng frs heorecal underpnnngs and emprcal evdence from some EU (European Unon) counres. Accordng o hs new research area, he Feldsen-Horoka and he wn defcs hypoheses could be ncorporaed and esmaed emprcally n a sngle equaon n order o provde plausble exlanaons for he long-run deermnans of curren accoun mbalances. Feldsen-Horoka (1980) presens ha changes n domesc nvesmen are very sensve o changes n domesc savngs. Thus, here s a posve long-run relaonshp beween he rao of domesc nvesmen-gross domesc produc and he rao of domesc savngs gross domesc ncome. Ths smple sascal assocaon s also regarded as he exsence of he degree of nernaonal capal mobly. Meanwhle he wn defc hypohess s defned as a posve long-run relaonshp beween he curren accoun and fscal balance. Fdrmuc (003) esed boh hypoheses for 1 OECD counres durng 1970-001 and concluded ha he wn defcs and Feldsen-Horoka hypoheses exsed only n he case of Hungary and Poland. The sudy of Fdrmuc (003) recenly has been adoped by a few researchers. Marnhero (008) repors a hgh degree of capal mobly and a rejecon of wn defc hypohess durng he perod of 1974-004 for Egyp. Alnas and Taban (008) argues ha he wn defcs and Feldsen hypoheses are vald n he case of Turksh daa for he perod of 1974-007. Usng he annual daa of 1976-010 for Paksan, Khan and Saeed (01) confrms he exsence of he wn defc and he Feldsen - Horoka hypoheses. Turkey has been mplemenng a se of economc reforms o ransform s mpor-subsung economc srucure o marke economy srucure snce 1980. The lberalzaon of money and
foregn exchange markes were relavely faser and effecve n comparson o reducng he sze of governmen n economy. To hs end, followng he neres rae lberalzaon n 1987, he capal accoun was also lberalzed n 1989 whch paved he way for foregn savngs o conrbue o he domesc savngs gap. Durng he decade of he 1990s and he begnng of he 000s, Turkey has faced boh severe curren accoun and budge defcs a he same me. Alhough he budge defcs were aken under conrol followng he ausery programme whch was pu no mplenaon n 001 followng he economc crses of 1999 and 001, he curren accoun defcs are sll seen o be runnng que hgh n he las decade. The objecve of hs paper s as follows: o es emprcally he valdy of he wn defc and he Feldsen Horoka hypoheses usng Turksh me seres daa durng 1987-004 and mplemenng a dynamc conegraon procedure as well as esablshng he casualy ess beween he varables boh whn and ou of sample perods. The am of hs sudy s o nvesgae he man deermnans of he curren accoun mbalances n Turkey and provde some polcy gudelnes for he polcy makers. Ths sudy dffers from Alnas and Taban (011) on wo dfferen accouns; frsly, he sudy of Alnas and Taban (011) covers he me perod of 1974-007 whch ncludes some perods (1974-1989) n whch Turkey dd no have fnancal accoun lberalzaons. Therefore, usng exernal savngs for domesc nvesmens was no a fnancal opon and he auhors dd no ake hs no accoun n her economerc model. Moreover, hs sudy exends he causaly analyss beyond he ou of sample perods. The remander of hs paper s organzed as follows: he nex secon presens a bref concepual framework and economerc mehodology. Secon 3 dscusses he emprcal resuls and he las secon concludes. 3
. Emprcal Model and Mehodology Fdrmuc (003) ses ou he relaonshp beween budge and curren accoun balances usng he naonal accouns as follows: Y = C + I + G + X M (1) where Y s ncome, C s prvae consumpon, I s prvae nvesmen, G s publc consumpon, X s expors and M s mpors. Eq.(1) can be arranged as folllows: X M = Y C G I = S I () Eq. () suggess ha he exernal accoun has o equal he dfference of naonal savngs. Thus, he curren accoun s drecly relaed o savng and nvesmen n he economy, mplyng ha as nvesmen s encouraged as a resul, exernal accoun wll be negavely affeced. However, a conracon n prvae or publc consumpon wll have a posve mpac on curren accoun balance as hey ncrease naonal savngs. As we separae publc g S from prvae savngs p S, hen publc savngs are relaed o fscal budge whch are defned as (T - G) n whch T s ax ncome. Smlarly, prvae savngs are defned as S p = Y T C. Thus, we wre ou Eq. () as follows: X M = ( Y T C ) + ( T G ) I = S + S I (3) p g Eq. (3) suggess ha f prvae savngs equal nvesmen, he curren accoun and fscal budge are drecly nerrelaed or wnned. The concep of wn defc hypohess fnds s 4
heorecal bass n he Mundell-Flemng open economy model and he Keynesan absorpon heory. The former approach argues ha an ncrease n budge defcs wll cause an ncrease n domesc neres rae above he world rae whch leads o capal nflows and exchange rae apprecaon and, n urn, leaves he counry s curren accoun n defcs. The laer heory demonsraes ha a rse n budge defcs nduces domesc absorpon whch resuls n an ncrease n mpors and a decrease n expors; hus, he curren accoun defcs occurs. On he oher hand, he Rcardan Equvalence Hypohess (REH) of Barro (1974) dcaes ha he curren accoun and budge balance are no relaed, mplyng ha he governmen ax polcy has no mpac on prvae spendng and naonal savngs. Accordng o Feldsen and Horoka (1980) n a world of perfec capal mobly, he fnancng of domesc nvesmen s no relaed o domesc savngs, f he domescs savngs and nvesmens are no correlaed mplyng hgh capal mobly. However, a number of emprcal research sudes have found reverse resuls leadng o he concluson of a puzzle ha a hgh poron of domesc nvesmen s sll fnanced from domesc savngs, especally n developed counres. On he oher hand, some researchers, such as Coakley e al. (1996) and Sachsda and Caeano (000), argue ha he Feldsen-Horoka hypohess does no necessarly mply capal mobly and should be regarded as an ndcaon of subsuon beween exernal and domesc savngs. Therefore, seems ha he debae over wheher savng-nvesmen co-movemen as an ndcaon of capal mobly s sll unresolved. Eq. (3) also mples ha here s a long-run relaonshp beween he curren accoun, he budge defc and oal nvesmen. Therefore, s possble o esmae Eq. (3) by a regresson model, as proposed by Fdrmuc (003). x α ( + ε (4) m = 0 + α1 g ) α 5
The lower case leers n Eq. (4) ndcae ha he varables are expressed as a share of GDP n whch (x m) sands for he curren accoun, ( g) represens he governmen budge balance and he nvesmen rao s defned as. A posve sgn for he coeffcen of fscal balance (.e. α 1 > 0) and a negave sgn for he coeffcen of nvesmen (.e. α < 0) are expeced ndcang ha a budge defc and hgh nvesmen deerorae he curren accoun. If boh slope coeffcens are equal o one, hen s assumed ha he counry s perfecly negraed no he world economy, mplyng ha boh budgeary and nvesmen expendures are fnanced on he world fnancal marke. If he coeffcen of budge balance s posve, resuls n a wn defc whch also mples non exsence of he REH. On he oher hand, f he coeffcen of nvesmen s relavely close o uny or hgher han uny, ndcaes he valdy of he Feldsen Horoka hypohess and, f he coeffcen of nvesmen s relavely close o zero, mples he exsence of he Feldsen Horoka puzzle. The shor-run dynamc adjusmen process of he long-run relaonshp n Eq. (4) may provde useful polcy recommendaons. I s possble o ncorporae he shor-run dynamcs no Eq. (4) by expressng n an error-correcon model as suggesed n Pesaran e al. (001). ( x m) β ( x m) 4 1 n1 1 = 1 = 0 = 0 + β ( g) 1 + β 6 1 + v n = β0+ β ( x m) + β ( g) + β3 5 n3 + (5) Ths approach, also known as auoregressve-dsrbued lag (ARDL), provdes he shor-run and long-run esmaes smulaneously. Shor-run effecs are refleced by he esmaes of he coeffcens aached o all frs-dfferenced varables. The long-run effecs of he explanaory varables on he dependen varable are obaned by he esmaes of β 5 -β 6 ha are normalzed on β 4. The ncluson of he lagged-level varables n Eq. (5) s verfed hrough he bounds esng procedure, whch s based on he Fsher (F) or Wald (W)-sascs. Ths procedure s 6
consdered as he frs sage of he ARDL conegraon mehod. Accordngly, a jon sgnfcance es ha mples no conegraon hypohess, (H 0 : all β4 o β = 6 0 ), agans he alernave hypohess, (H 1 : a leas one of β4 o β 6 0 ) should be performed for Eq. (5). The F/W es used for hs procedure has a non-sandard dsrbuon. Thus, Pesaran e al. (001) compue wo ses of crcal values for a gven sgnfcance level wh and whou a me rend. One se assumes ha all varables are I(0) and he oher se assumes hey are all I(1). If he compued F/W-sasc exceeds he upper crcal bounds value, hen he H 0 s rejeced, mplyng conegraon. In order o deermne wheher he adjusmen of varables s oward her long-run equlbrum values, esmaes of β 4 -β 6 are used o consruc an error-correcon erm (EC). Then lagged-level varables n Eq. (5) are replaced by EC -1 formng a modfed verson of Eq. (5) as follows: n1 n n3 0 + β1 ( x m) + β ( g) + β3 + λec 1 = 1 = 0 = 0 ( x m) = β + µ (6) Eq. (6) s re-esmaed one more me usng he same lags prevously. A negave and sascally sgnfcan esmaon of λ no only represens he speed of adjusmen bu also provdes an alernave means of supporng conegraon beween he varables. Pesaran e al. (001) conegraon approach has some mehodologcal advanages n comparson o oher sngle conegraon procedures. Reasons for he ARDL are: ) endogeney problems and nably o es hypoheses on he esmaed coeffcens n he long-run assocaed wh he Engle-Granger (1987) mehod are avoded; ) he long and shor-run coeffcens of he model n queson are esmaed smulaneously; ) he ARDL approach o esng for he exsence of a long-run relaonshp beween he varables n levels s applcable rrespecve of wheher he underlyng regressors are purely saonary I(0), purely non-saonary I(1), or muually 7
8 conegraed; v) he small sample properes of he bounds esng approach are far superor o ha of mulvarae conegraon, as argued n Narayan (005). The Granger represenaon heorem suggess ha here wll be Granger causaly n a leas one drecon f here exss a conegraon relaonshp among he varables n equaon (1), provdng ha hey are negraed order of one. Engle and Granger (1987) cauon ha he Granger causaly es, whch s conduced n he frs-dfferenced varables by means of a VAR, wll be msleadng n he presence of conegraon. Therefore, an ncluson of an addonal varable o he VAR sysem, such as he error correcon erm would help us o capure he long-run relaonshp. To hs end, an augmened form of he Granger causaly es nvolvng he error correcon erm s formulaed n a mulvarae ph order vecor error correcon model. [ ] + + + = = p EC g m x L g m x L 3 1 1 3 1 33 3 31 3 1 13 1 11 1 3 1 ) ( ) ( ) (1 ) ( ) ( ) (1 ω ω ω δ δ δ θ θ θ (7) ) 1 ( L s he lag operaor. EC -1 s he error correcon erm, whch s obaned from he longrun relaonshp descrbed n Eq. (1), and s no ncluded n Eq. (7) f one fnds no conegraon amongs he vecor n queson. The Granger causaly es may be appled o Eq. (7) as follows: ) by checkng sascal sgnfcance of he lagged dfferences of he varables for each vecor; hs s a measure of shor-run causaly; and ) by examnng sascal sgnfcance of he error-correcon erm for he vecor ha here exss a long-run relaonshp. As a passng noe, one should reveal ha Eq. (6) and (7) do no represen compeng error-correcon models because Eq. (6) may resul n dfferen lag srucures on each regressors a he acual esmaon sage; see Pesaran e al. (001) for deals and s mahemacal dervaon. All error-correcon vecors n equaon (7) are esmaed wh he same lag srucure ha s deermned n unresrced VAR framework.
Esablshng Granger causaly s resrced o essenally whn sample ess, whch are useful n dsngushng he plausble Granger exogeney or endogeny of he dependen varable n he sample perod, bu are unable o deduce he degree of exogeny of he varables he beyond he sample perod. To examne hs ssue, he decomposon of varance of he varables may be used. The varance decomposons (VDCs) measure he percenage of a varable s forecas error varance ha occurs as he resul of a shock (or an nnovaon) from a varable n he sysem. Sms (1980) noes ha f a varable s ruly exogenous wh respec o he oher varables n he sysem, own nnovaons wll explan all of s forecas error varance (.e., almos 100%). By lookng a VDCs polcy makers gaher addonal nsgh as o wha percenage (of he forecas error varance) of each varable s explaned by s deermnan. 3. Resuls Annual daa over he perod 1987-004 were used o esmae Eq. (5) and (6) by he ARDL conegraon procedure of Pesaran e al. (001). Varable defnon and sources of daa are ced n he Appendx. Correlaon marx and graphs of he varables n Eq. (4) are provded below n Table 1 and Graph 1, respecvely n order o presen he prelmnary relaonshps beween he varables. [INSERT TABLE 1] Table 1. Correlaon Marx (x-m) (-g) (x-m) 1.000 0.09-0.145 (-g) 0.09 1.000 0.701-0.145 0.701 1.000 Noes: SD and CV sands for sandard devaon and coeffcen of varaons, respecvely. Consderng he correlaon marx n Table 1, s clear ha here s a weak posve correlaon beween he curren accoun and fscal balance. I s also seen ha he here exss 9
a negave relaonshp beween he curren accoun balance and nvesmen level. These smple sascal relaon dd no hold n he oher perods. I s very lkely ha because of hese pror resuls, when he ARDL conegraon was mplemened n oher perods such as 1980-01 and 1987-01, we could no fnd any long-run relaonshps beween he varables apar from he perod of 1987-004. Thus, our economerc resuls are lmed wh only he seleced esmaon perod. Graph 1: Plo of he varables 30 0 10 0-10 -0 1987 199 1997 00 004 CABY BDY INVY In Graph 1, CABY sands for curren defcs whch s n he mddle, BDY represens he budge defcs whch s a he boom, and INVY sands for he nvesmen whch s a he op. All varables are refleced as a percenage of GDP. To mplemen he Pesaran e al. (001) procedure, one has o ensure ha none of he explanaory varables n equaon (1) s above I(1). Three ess were used o es un roos n he varables: Augmened Dckey-Fuller (henceforh, ADF) (1979, 1981), Phllps-Perron (henceforh, PP) (1988), and Ello-Rohenberg-Sock (henceforh, ERS) (1996). Un roo ess resuls are dsplayed n Table o warran mplemenng he ARDL approach o 10
conegraon as he varables are n he combnaon of I(0) and I(1). Vsual nspecons of he varables show no srucural breaks. [INSERT TABLE ] Table. Un roo resuls Varables ADF PP ERS (x m) 4.99 * 5.68 * 4.3 * ( g) 3.08.57 3.14 3.71 * 4.6 * 1.88 (x m) 5.98 * 3.95 * 3.95 * ( g) 4.83 * 4.83 * 4.83 * 5.70 * 5.71 * 5.71 * Noes: The sample level un roo regressons nclude a consan and a rend. The dfferenced level un roo regressons are wh a consan and whou a rend. All es sascs are expressed n absolue erms for convenence. Rejecon of un roo hypohess s ndcaed wh an asersk. sands for frs dfference. INSERT TABLE 3] Table 3. The resuls of F and W ess for conegraon. Panel A: The assumed long-run relaonshp: F / W (( x m) ( g), )) F-sasc 95% LB 95% UB 90% LB 90% UB 1.70 4.77 6.19 3.71 4.91 W-sasc 65.1 14.33 18.57 11.14 14.73 If he es sasc les beween he bounds, he es s nconclusve. If s above he upper bound (UB), he null hypohess of no level effec s rejeced. If s he below he lower bound (LB), he null hypohess of no level effec canno be rejeced. On esablshng a long-run conegraon relaonshp amongs he varables of Eq. (4), a wo-sep procedure o esmae he ARDL model was carred ou. Frs, n search of he opmal lag lengh of he dfferenced varables of he shor-run coeffcens, Schwarz Bayesan Creron (SBC) was ulzed and n he second sep, he ARDL model was esmaed. The resuls of SBC based ARDL model s dsplayed n Panel A, B, and C of Table 4. The resuls of long-run coeffcens are presened n Panel A of Table 4, whereas he shor-run esmaes are repored n Panel B of Table 4. Fnally, Panel C of Table 4 demonsraes he shor-run dagnosc es resuls. The overall regresson resuls are sasfacory n erms of dagnosc 11
ess. The shor-run dagnoscs obaned from he esmaon of Eq. (5) sugges ha he esmaed model s free from a seres of economerc problems such as seral correlaon, funconal form, normaly, and heeroscedascy. [INSERT TABLE 4] Table 4. ARDL conegraon resuls. Panel A: Esmaed long-run coeffcens Dependen varable: (x m) Regressor Coeffcen Sandard error T-rao ( g) 0.55 * 0.095.680-0.165 ** 0.084 1.998 Consan 4.446 **.354 1.888 Panel B: Error correcon represenaon resuls. Dependen varable: (x m) Regressor Coeffcen Sandard error T-rao (x m) -1 0.670 * 0.17 5.68 ( g) 0.040 0.100 0.407 ( g) -1-0.48 * 0.103.403-0.59 * 0.10 5.756-1 0.33 * 0.091.54 EC -1-1.55 * 0.05 7.414 Panel C: Dagnosc es resuls. R 0.9 F-sasc 34.8 * χ SC(1) 0.034 χ FF (1) 4.07 RSS 5.4 DW-sasc 1.89 χ () 1.68 χ (1) 0.90 H *, **, and, *** ndcae, 1%, 5%, and 10% sgnfcance levels respecvely. RSS sands for resdual sum of squares. T-raos are n absolue values. χ SC, χ FF, χ, and χ H are Lagrange mulpler sascs for ess of resdual correlaon, funconal form ms-specfcaon, non-normal errors and heeroskedascy, respecvely. These sascs are dsrbued as Ch-squared varaes wh degrees of freedom n parenheses. The crcal values for χ (1) = 3. 84 and χ () = 5. 99 are a 5% sgnfcance level. The overall resuls confrm he exsence of he wn defcs phenomenon for Turkey durng he esmaon perod, snce he coeffcen of he fscal accoun s posve and sascally sgnfcan. The esmaed governmen budge defc, 0.55, suggess ha for each 1 % ncrease n budge defcs, here resuls 0.55% rse n curren accoun defcs n he longrun. Smlarly, he coeffcen of nvesmen, -0.165, mples ha abou less han 1/5 of domesc nvesmens are fnanced from world fnancal markes. As hs value s relavely close o zero, also an ndcaon of he exsence of he Feldsen Horoka puzzle, whch suggess ha Turkey s fnancal negraon o he world markes s lmed durng he esmaon perod despe he wave of globalzaon n he decades of 1990s and 000s. These 1
resuls are n lne wh he sudy of Alnas and Saban (011) for Turkey. The speed of adjusmen parameer s 1.5, suggesng ha when he curren accoun balance equaon s above or below s equlbrum level, adjuss by 76% whn he frs year. The full convergence o s equlbrum level akes less han one year. [INSERT TABLE 5] Table 5. Resuls of Granger causaly F-sascs (probably) Dependen Varable (x m) ( g) EC -1 (-sasc) (x m) - 1.3 (0.09) 0.89 (0.15) -0.66 (1.1) ( g) 0.6 (0.61) - 0.79 (0.56) 0.44 (1.4) 1.06 (0.3) - Causaly nference : none * ** and ndcae 5 % and 10 % sgnfcance levels, respecvely. The probably values are n brackes. The opmal lag lengh s and s based on SBC. Granger-causaly resuls ndcae ha here exss no Granger-causaly beween he curren accoun and budge balance. Ths may be also be nerpreed as he confrmaon of he REH n he shor-run. However, hs nerpreaon would be flawed as he conegraon resuls ndcae he reverse suaon n he frs nsance. Granger-causaly resuls conradc he resul of Alnas and Saban (011). [INSERT TABLE 6] Table 6. Decomposon of Varance Percenage of forecas varance explaned by nnovaons n: Years Curren accoun defcs Budge defcs Invesmen 0 1.000 0.000 0.000 1 0.79 0.05 0.44 0.71 0.057 0.30 3 0.731 0.055 0.1 5 0.718 0.061 0.19 10 0.716 0.066 0.16 Noes: Fgures n he frs column refer o horzons (.e., number of years). All fgures are rounded o wo decmal places. The covarances marces of errors from all he VECMs appeared o be very small and approachng zero suggesng ha he combnaons of all he varables n hese models are lnear. Therefore, he orohogonal case for he varance decomposons are appled. 13
Table 6 provdes he summary resuls for he VDCs. As for he VDCs, a subsanal poron of he varance of curren accoun defcs (7.9%) s explaned by s own nnovaons n he shor-run, for example, a he wo-year horzon. In he long-run, for example, a he en-year horzon, he poron of he varance of curren accoun defcs slghly decreases from 71.6% mplyng ha oher varables explan abou 7 % of he shocks n he curren accoun defcs. The pos-sample VDCs also ndcaes ha 1.6% of he shocks n he curren accoun defcs s due o nnovaons n nvesmen a he en year-horzon, emphasng he fac ha nvesmen s he man cause of he curren accoun defcs n he long-run. 4. Conclusons Ths sudy esed he valdy of he wn-defc and he Feldsen Horoka hypoheses for Turkey and concludes ha only he former hypohess s vald for he perod of 1987-004 as far as he conegraon ess are concerned. Ths paper also fnds ha he Feldsen Horoka puzzle s presen as Turkey appeared o be negraed no world fnancal markes relavely wh a low degree capal mobly and durng he esmaon perod less han 1/5 of s nvesmens s fnanced wh foregn savngs despe he consderable amoun of globalzaon. However, he augmened Granger-causaly ess or he VDCs dd no ndcae any sgnfcan causaly beween he curren and fscal accouns. Therefore, our resuls are no conclusve o confrm ha here exss wn defc phenomenon n Turkey. The VDCs are presened here o sugges ha one of he man deermnans of he curren accoun defcs n he long-run s he level of nvesmens. Turkey has been pursung a growh polcy n he las decade, where foregn savngs are subsued for domesc savngs and prvae consumpons are encouraged. I would be approprae o recommend ha Turkey should connue o manan s floang exchange rae regme and allow s currency o deprecae faser o reduce he curren accoun 14
defcs n he shor-run bu hs polcy would no be effcen n he long-run. Therefore, he expor promoon polces along wh he srucural reforms should be desgned o overcome he curren accoun defcs. Smlarly, ax ncreases would allevae he fscal defcs n he long-run. Moreover, he long erm-savng polcy n he form of penson funds should be wdened wh compulsory measuremens o reduce furher he savng gaps. Appendx Daa defnon and sources Daa are colleced from wo dfferen sources: Inernaonal Fnancal Sascs of Inernaonal Moneary Fund (IMF) and Turksh Mnsry of Fnance (TMoF). (x m) s he dfference beween expors and mpors as % of GDP. Source: IMF. ( g) s he dfference beween ax revenues and governmen expendures as % of GDP. Source: TMoF. s he oal nvesmens as % of GDP. Source: IMF. References Alnas, H., Taban, S. (011) Twn defc problem and Feldsen Horoka puzzle hypohess n Turkey: ARDL bound esng approach and nvesgaon of causaly, Inernaonal Research Journal of Fnance and Economcs, No.74, pp.30-45. Barro, R. J. (1974) Are governmen bonds ne wealh? Journal of Polcal Economy, Vol.8, pp.1095-1117. Coakley, J., Kulas, F., Smh, R. (1996) Curren accoun solvency and he Feldsen Horoka puzzle, Economc Journal, Vol.106, pp.60-67. Dckey, D. A., Fuller, W. A. (1981) Lkelhood rao sascs for auoregressve me seres wh a un roo, Economerca, Vol.49, pp.1057-107. 15
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