The impacts of corruption on budget balance and public debt in Turkey: an empirical analysis

Abstract

Today, maintaining stability, transparency and budget balance are main indicators for developed and developing countries. Corruption, causing deviation from these indicators and its results are important issues that should be researched. Because corruption changes the composition of public expenditures leading to inefficient expenditures, as well as reducing public revenues and affecting budget balance negatively. Increase in budget deficit leads to an increase in public debt stock. In this study, the effect of corruption in Turkey on budget balance and public debt is analyzed by using Johansen Cointegration, VAR (Vector Autoregressive Model) and Granger Causality methods for 1995-2019 years. Empirical findings state that there is no cointegration relationship among variables and there are causalities from budget deficits and public debt burden to corruption and from budget deficit to public debt. Furthermore, VAR method provides empirical evidence that budget deficit and corruption affect each other.