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THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS

Year 2012, Issue: 17, 1 - 22, 02.12.2014

Abstract

The aim of the study is to investigate the effects of the 2008 Financial Crisis, which affected the financial variables as well as the real variables such as economic growth and unemployment, on budget deficits of countries. In the study, general government deficit or surplus, general government debt, total government expenditure, total government revenue, taxes on production and imports, government fixed investment and inflation data covering 1998-2008 periods have been used. In order to determine the effect of the crisis, the crisis dummy has been formed. The results of the study revealed that total government revenue and inflation have a positive effect on budget balance that is to say they reduce the budget deficit. On the other hand total government expenditures have a negative effect on budget balance that is to say they increase the budget deficit. In addition, the crisis variable is determined to have an increasing impact on budget deficit.

References

  • Aghion, P. and Marinescu, I. (2007), “Cyclical Budgetary Policy and Economic Growth: What do We Learn from OECD Panel Data?”, Chicago Journals, 22, pp. 251-293.
  • Akinboade, O.A. (2004), “The Relationship between Budget Deficit and Interest Rates in South Africa: Some Econometric Results”, Development Southern Africa, 21(2), pp. 289- 302.
  • Baltagi, B.H. (2005), Econometric Analysis of Panel Data. Third Edition, John Wiley & Sons, LTD., Chichester.
  • Bayar, A. and Smeets, B. (2009), “Economic and Political Determinants of Budget Deficits in the European Union: A Dynamic Random Coefficient Approach”, CESifo Working Paper, No: 2546.
  • Bhargava, A., Franzini, L. and Narendranathan, W. (1982), “Serial Correlation and the Fixed Effects Model”, Review of Economic Studies, 49, pp. 533–549.
  • Darrat, A.F. (1988), “Have Large Budget Deficits Caused Rising Trade Deficits?”, Southern Economic Journal, 54(4), pp. 879-887.
  • Dooley, M. and Verma, S. (2001), “Rescue Packages and Output Losses Following Crises”, NBER Working Paper, No: 8315.
  • Egeli, H. (1999), “Gelişmekte Olan Ülkelerde Bütçe Açıkları”, Süleyman Demirel Üniversitesi ĐĐBF Dergisi, 4(2), pp. 293-303.
  • Egeli, H. (2000), “Gelişmiş Ülkelerde Bütçe Açıkları”, Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 2(4), pp. 62-78.
  • European Commission. (2009), Economic Crisis in Europe: Causes Consequences and Responses, http://ec.europa.eu/economy_finance/publications/publication15887_en.pdf, Accessed: 02.04.2010.
  • Eurostat, (2009), http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/, Accessed: 23.04.2010
  • Gerard, D. (2008), “Managing the Financial Crisis in Europe: Why Competition Laws is Part of the Solution, Not of the Problem”, The Online Magazine for Global Competition Policy Release,1, pp. 2-14.
  • Greene, W.H. (2003), Econometric Analysis. Fifth Edition, Prentice Hall, ABD.
  • Hallerberg, M. and Hagen, J. (1997), “Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union”, NBER Working Paper, No: 6341.
  • Hausman, J.A. (1978), “Specification Tests in Econometrics”, Econometrica, 46 (6), pp. 1251–1271.
  • Im, K.S., Pesaran, M. H. and Shin, Y. (2003), “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, 115, pp. 53–74.
  • Levin, A., Lin, C.F. and Chu, C. (2002) “Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties”, Journal of Econometrics, 108, pp. 1-24.
  • Metin, K. (1998), “The Relationship between Inflation and the Budget Deficit in Turkey”, Journal of Business&Economic Statistics, 16(4), pp. 412-422.
  • Piersanti, G. (2000), “Current Account Dynamics and Expected Future Budget Deficits: Some International Evidence”, Journal of International Money and Finance, 19, pp. 255–271.
  • Tekin-Koru, A. and Özmen, E. (2003), “Budget Deficits, Money Growth and Inflation: The Turkish Evidence”, Applied Economics. Taylor and Francis Journals, 35(5), pp. 591-596.
  • Woo, J. (2003), “Economic, Political, and Institutional Determinants of Public Deficits”, Journal of Public Economics, 87, pp. 387–426.

THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS

Year 2012, Issue: 17, 1 - 22, 02.12.2014

Abstract

The aim of the study is to investigate the effects of the 2008 Financial Crisis, which affected the financial variables as well as the real variables such as economic growth and unemployment, on budget deficits of countries. In the study, general government deficit or surplus, general government debt, total government expenditure, total government revenue, taxes on production and imports, government fixed investment and inflation data covering 1998-2008 periods have been used. In order to determine the effect of the crisis, the crisis dummy has been formed. The results of the study revealed that total government revenue and inflation have a positive effect on budget balance that is to say they reduce the budget deficit. On the other hand total
government expenditures have a negative effect on budget balance that is to say they increase the budget deficit. In addition, the crisis variable is determined to have an increasing impact on budget deficit.  

References

  • Aghion, P. and Marinescu, I. (2007), “Cyclical Budgetary Policy and Economic Growth: What do We Learn from OECD Panel Data?”, Chicago Journals, 22, pp. 251-293.
  • Akinboade, O.A. (2004), “The Relationship between Budget Deficit and Interest Rates in South Africa: Some Econometric Results”, Development Southern Africa, 21(2), pp. 289- 302.
  • Baltagi, B.H. (2005), Econometric Analysis of Panel Data. Third Edition, John Wiley & Sons, LTD., Chichester.
  • Bayar, A. and Smeets, B. (2009), “Economic and Political Determinants of Budget Deficits in the European Union: A Dynamic Random Coefficient Approach”, CESifo Working Paper, No: 2546.
  • Bhargava, A., Franzini, L. and Narendranathan, W. (1982), “Serial Correlation and the Fixed Effects Model”, Review of Economic Studies, 49, pp. 533–549.
  • Darrat, A.F. (1988), “Have Large Budget Deficits Caused Rising Trade Deficits?”, Southern Economic Journal, 54(4), pp. 879-887.
  • Dooley, M. and Verma, S. (2001), “Rescue Packages and Output Losses Following Crises”, NBER Working Paper, No: 8315.
  • Egeli, H. (1999), “Gelişmekte Olan Ülkelerde Bütçe Açıkları”, Süleyman Demirel Üniversitesi ĐĐBF Dergisi, 4(2), pp. 293-303.
  • Egeli, H. (2000), “Gelişmiş Ülkelerde Bütçe Açıkları”, Dokuz Eylül Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 2(4), pp. 62-78.
  • European Commission. (2009), Economic Crisis in Europe: Causes Consequences and Responses, http://ec.europa.eu/economy_finance/publications/publication15887_en.pdf, Accessed: 02.04.2010.
  • Eurostat, (2009), http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/, Accessed: 23.04.2010
  • Gerard, D. (2008), “Managing the Financial Crisis in Europe: Why Competition Laws is Part of the Solution, Not of the Problem”, The Online Magazine for Global Competition Policy Release,1, pp. 2-14.
  • Greene, W.H. (2003), Econometric Analysis. Fifth Edition, Prentice Hall, ABD.
  • Hallerberg, M. and Hagen, J. (1997), “Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union”, NBER Working Paper, No: 6341.
  • Hausman, J.A. (1978), “Specification Tests in Econometrics”, Econometrica, 46 (6), pp. 1251–1271.
  • Im, K.S., Pesaran, M. H. and Shin, Y. (2003), “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, 115, pp. 53–74.
  • Levin, A., Lin, C.F. and Chu, C. (2002) “Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties”, Journal of Econometrics, 108, pp. 1-24.
  • Metin, K. (1998), “The Relationship between Inflation and the Budget Deficit in Turkey”, Journal of Business&Economic Statistics, 16(4), pp. 412-422.
  • Piersanti, G. (2000), “Current Account Dynamics and Expected Future Budget Deficits: Some International Evidence”, Journal of International Money and Finance, 19, pp. 255–271.
  • Tekin-Koru, A. and Özmen, E. (2003), “Budget Deficits, Money Growth and Inflation: The Turkish Evidence”, Applied Economics. Taylor and Francis Journals, 35(5), pp. 591-596.
  • Woo, J. (2003), “Economic, Political, and Institutional Determinants of Public Deficits”, Journal of Public Economics, 87, pp. 387–426.
There are 21 citations in total.

Details

Primary Language English
Journal Section Makaleler
Authors

Serdar Kurt

Canan Güneş This is me

Verda Davaslıgil This is me

Publication Date December 2, 2014
Published in Issue Year 2012 Issue: 17

Cite

APA Kurt, S., Güneş, C., & Davaslıgil, V. (2014). THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS. Istanbul University Econometrics and Statistics E-Journal(17), 1-22.
AMA Kurt S, Güneş C, Davaslıgil V. THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS. Istanbul University Econometrics and Statistics e-Journal. December 2014;(17):1-22.
Chicago Kurt, Serdar, Canan Güneş, and Verda Davaslıgil. “THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS”. Istanbul University Econometrics and Statistics E-Journal, no. 17 (December 2014): 1-22.
EndNote Kurt S, Güneş C, Davaslıgil V (December 1, 2014) THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS. Istanbul University Econometrics and Statistics e-Journal 17 1–22.
IEEE S. Kurt, C. Güneş, and V. Davaslıgil, “THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS”, Istanbul University Econometrics and Statistics e-Journal, no. 17, pp. 1–22, December 2014.
ISNAD Kurt, Serdar et al. “THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS”. Istanbul University Econometrics and Statistics e-Journal 17 (December 2014), 1-22.
JAMA Kurt S, Güneş C, Davaslıgil V. THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS. Istanbul University Econometrics and Statistics e-Journal. 2014;:1–22.
MLA Kurt, Serdar et al. “THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS”. Istanbul University Econometrics and Statistics E-Journal, no. 17, 2014, pp. 1-22.
Vancouver Kurt S, Güneş C, Davaslıgil V. THE EFFECT OF GLOBAL FINANCIAL CRISIS ON BUDGET DEFICITS IN EUROPEAN COUNTRIES: PANEL DATA ANALYSIS. Istanbul University Econometrics and Statistics e-Journal. 2014(17):1-22.