Do Private Savings Offset Public Savings in Turkey
2013
The issue of whether public savings offset private savings, and visa vice, has important
implications for the effectiveness of fiscal policy. This study examines long-run relationship
between public and private savings rates using annual Turkish data for the period 1975-2005.
The result of Engle-Granger cointegration test has shown that there is no long-run relationship
between private and public savings ratios. However,once endogenously determined structural
break is allowed, the test results confirm the existence of the cointegration relationship
between private and public savings. Econometric estimation of the offset coefficients using
both FMOLS and DOLS yields values of between -0.11 and -0.82. The results also indicate
that the potency of fiscal policy significantly reduced with the liberalization of financial
markets.Keywords: Savings, Offset coefficient, Ricardian Equivalence, DOLS, FMOLS.
JEL Classificiation: E6, H6, E21
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