ROMANIAN JOURNAL OF ECONOMIC FORECASTING, vol.25, no.4, pp.74-95, 2022 (SSCI)
The fiscal theory of the price level (FTPL) emphasizes the distinction between Ricardian and
non-Ricardian regimes and claims that if non-Ricardian regime prevails in an economy, the
price level will be pinned down by fiscal policy rather than monetary policy. To determine the
dominant regime in Türkiye we use quarterly fiscal data (primary balance and government
debt) and run bivariate VAR analysis. Additionally, we subdivide primary surplus into its
components as structural and cyclical balance data and conduct trivariate VAR analysis.
The results strictly show that the non-Ricardian regime prevails in the period 1996-2005.
However, for the period 2006-2019, the bivariate results show that the Ricardian regime is
dominant, while the trivariate model findings show that the government structurally follows
non-Ricardian policies.