Effectiveness of Monetary and Fiscal Policies in Turkish Economy

The effectiveness of monetary and fiscal policies is an issue which is continuously discussed but could not be reached to any solution. In fact, the essence of the issue is based on the Monetarist-Keynesian debate. Monetarists favour monetary policy while Keynesian favour fiscal policy in the sense of effectiveness. In this study, it has been examined whether monetary or fiscal policy is more effective in Turkish economy. The variables GDP, money supply (M2) and public expenditures are employed in the study. The data used are quarterly and cover the period 1987:Q1-2007:Q3. According to the findings obtained from the results of ARDL approach, fiscal policy is more effective than monetary policy in Turkish economy and its effect is negative.