Measurement of public sector deficit in Turkey alternative measures and indicators

Abstract

the interest payment of the public sector expenditures. in the measurement of the cyclically-adjusted deficit, a base year for the GNP is chosen and the rate of revenues and expenditures with respect to GNP in the base year is calculated. Then the rate of revenues and expenditures with respect to GNP are adjusted to the values of the base year ratios. Following the altenıative deficit measurement methods, the impact of the public sector operations on the aggregate demand of the economy is measured by taking the difference between cyclically-adjusted deficit and conventional deficit Consolidated budget deficit along with alternative measurement methods is analyzed for the period of 1980-1991. Non-financial public sector deficit and alternative deficit measures are analyzed for the period of 1985-1991. in addition to the alternative deficit measurements, consolidated public sector borrowing requirement is presented by adding Gentral Bank borrowing requirement into tiıat of the non-financial public sector. Furtiıermore, consolidated public sector conventional and inflation-adjusted borrowing requirements are examined. Wth alternative measurement methods, the performance of the public sector is analyzed in different /vays. First, when primary deficit is examined it is observed that non-financial public sector primary deficit can change into surplus. Second, examination of the operational deficit indicates ivABSTRACT In Turkey, public sector deficits are generally measured by the difference between expenditures and revenues. However, alternative methods should be established in order to analyze the interactive effect of the public sector deficits on the macroeconomy. In addition to the establishment of alternative definitions of the public deficit, the components of the public sector should be defined clearly. In most countries, besides the conventional components of the public sector, central bank accounts are also included into the public balances because of existence of quasi-fiscal activities. This thesis presents alternative measurement methods for the public sector deficit for Turkey and introduces a different coverage of the public sector by including Central Bank accounts in the accounts of the public sector. As alternative methods, primary deficit, operational deficit and cyclically-adjusted deficit of the consolidated budget and non-financial public sector of Turkey are measured and analyzed in this thesis. Primary deficit is measured by excluding interest payments from the total expenditure of the accounts. Operational deficit, that is, inflation-adjusted deficit, is measured by calculating inflationary erosion of the public sector net debt to the private sector, then subtracting inflationary erosion fromthe interest payment of the public sector expenditures. in the measurement of the cyclically-adjusted deficit, a base year for the GNP is chosen and the rate of revenues and expenditures with respect to GNP in the base year is calculated. Then the rate of revenues and expenditures with respect to GNP are adjusted to the values of the base year ratios. Following the altenıative deficit measurement methods, the impact of the public sector operations on the aggregate demand of the economy is measured by taking the difference between cyclically-adjusted deficit and conventional deficit Consolidated budget deficit along with alternative measurement methods is analyzed for the period of 1980-1991. Non-financial public sector deficit and alternative deficit measures are analyzed for the period of 1985-1991. in addition to the alternative deficit measurements, consolidated public sector borrowing requirement is presented by adding Gentral Bank borrowing requirement into tiıat of the non-financial public sector. Furtiıermore, consolidated public sector conventional and inflation-adjusted borrowing requirements are examined. Wth alternative measurement methods, the performance of the public sector is analyzed in different /vays. First, when primary deficit is examined it is observed that non-financial public sector primary deficit can change into surplus. Second, examination of the operational deficit indicates iv

ABSTRACT In Turkey, public sector deficits are generally measured by the difference between expenditures and revenues. However, alternative methods should be established in order to analyze the interactive effect of the public sector deficits on the macroeconomy. In addition to the establishment of alternative definitions of the public deficit, the components of the public sector should be defined clearly. In most countries, besides the conventional components of the public sector, central bank accounts are also included into the public balances because of existence of quasi-fiscal activities. This thesis presents alternative measurement methods for the public sector deficit for Turkey and introduces a different coverage of the public sector by including Central Bank accounts in the accounts of the public sector. As alternative methods, primary deficit, operational deficit and cyclically-adjusted deficit of the consolidated budget and non-financial public sector of Turkey are measured and analyzed in this thesis. Primary deficit is measured by excluding interest payments from the total expenditure of the accounts. Operational deficit, that is, inflation-adjusted deficit, is measured by calculating inflationary erosion of the public sector net debt to the private sector, then subtracting inflationary erosion fromthe interest payment of the public sector expenditures. in the measurement of the cyclically-adjusted deficit, a base year for the GNP is chosen and the rate of revenues and expenditures with respect to GNP in the base year is calculated. Then the rate of revenues and expenditures with respect to GNP are adjusted to the values of the base year ratios. Following the altenıative deficit measurement methods, the impact of the public sector operations on the aggregate demand of the economy is measured by taking the difference between cyclically-adjusted deficit and conventional deficit Consolidated budget deficit along with alternative measurement methods is analyzed for the period of 1980-1991. Non-financial public sector deficit and alternative deficit measures are analyzed for the period of 1985-1991. in addition to the alternative deficit measurements, consolidated public sector borrowing requirement is presented by adding Gentral Bank borrowing requirement into tiıat of the non-financial public sector. Furtiıermore, consolidated public sector conventional and inflation-adjusted borrowing requirements are examined. Wth alternative measurement methods, the performance of the public sector is analyzed in different /vays. First, when primary deficit is examined it is observed that non-financial public sector primary deficit can change into surplus. Second, examination of the operational deficit indicates ivABSTRACT In Turkey, public sector deficits are generally measured by the difference between expenditures and revenues. However, alternative methods should be established in order to analyze the interactive effect of the public sector deficits on the macroeconomy. In addition to the establishment of alternative definitions of the public deficit, the components of the public sector should be defined clearly. In most countries, besides the conventional components of the public sector, central bank accounts are also included into the public balances because of existence of quasi-fiscal activities. This thesis presents alternative measurement methods for the public sector deficit for Turkey and introduces a different coverage of the public sector by including Central Bank accounts in the accounts of the public sector. As alternative methods, primary deficit, operational deficit and cyclically-adjusted deficit of the consolidated budget and non-financial public sector of Turkey are measured and analyzed in this thesis. Primary deficit is measured by excluding interest payments from the total expenditure of the accounts. Operational deficit, that is, inflation-adjusted deficit, is measured by calculating inflationary erosion of the public sector net debt to the private sector, then subtracting inflationary erosion from