Triggering economic growth to ensure financial stability: case study of Northern Cyprus
Abstract This study questions the importance of public debt in stable growth between 1980 and 2018, specifically, the Ricardian equivalence hypothesis and Keynesian view are questioned. This study used data obtained from the Northern Cyprus State Planning Office. A restricted vector autoregressive m...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2023-04-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-023-00481-7 |
| _version_ | 1797845835067686912 |
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| author | Ergin Akalpler |
| author_facet | Ergin Akalpler |
| author_sort | Ergin Akalpler |
| collection | DOAJ |
| description | Abstract This study questions the importance of public debt in stable growth between 1980 and 2018, specifically, the Ricardian equivalence hypothesis and Keynesian view are questioned. This study used data obtained from the Northern Cyprus State Planning Office. A restricted vector autoregressive model is used to test the causal relationships between this model and public debt, government expenditure, total capital, consumption, investment, employment, net exports, exchange rate, and gross domestic product growth rate. To ensure financial stability, the variables that trigger economic growth through increased interactions were evaluated. Accordingly, unlike other studies, the Wald test results reveal that public debt does not have a direct effect on the gross national product but indirectly affects total capital, consumption, investment, and public expenditure, all of which influence real gross domestic product (RGDP). It has been observed that employment affects RGDP, consumption, government spending, and investment. There is also bidirectional causality between consumption, government spending, and RGDP. The estimates of the Ricardian equivalent hypothesis are important. However, today's changing economic policies, declining real incomes, and consumer behavior in the face of ever-increasing inflation require that the theory be redesigned. Therefore, contrary to theoretical predictions, consumers are concerned about maintaining their standard of living rather than directing tax deductions to savings. Contrary to the claims of Keynesian researchers, no causal relationship is observed between public debt and growth in this study. However, public debt directly affects total capital, consumption, government spending, and investment, which are important for sustainable economic policy. |
| first_indexed | 2024-04-09T17:45:23Z |
| format | Article |
| id | doaj.art-c4f264456db84e9d94b04c976ffbcec2 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-04-09T17:45:23Z |
| publishDate | 2023-04-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-c4f264456db84e9d94b04c976ffbcec22023-04-16T11:23:01ZengSpringerOpenFinancial Innovation2199-47302023-04-019114010.1186/s40854-023-00481-7Triggering economic growth to ensure financial stability: case study of Northern CyprusErgin Akalpler0Faculty of Economics and Business Administration, Cyprus Science UniversityAbstract This study questions the importance of public debt in stable growth between 1980 and 2018, specifically, the Ricardian equivalence hypothesis and Keynesian view are questioned. This study used data obtained from the Northern Cyprus State Planning Office. A restricted vector autoregressive model is used to test the causal relationships between this model and public debt, government expenditure, total capital, consumption, investment, employment, net exports, exchange rate, and gross domestic product growth rate. To ensure financial stability, the variables that trigger economic growth through increased interactions were evaluated. Accordingly, unlike other studies, the Wald test results reveal that public debt does not have a direct effect on the gross national product but indirectly affects total capital, consumption, investment, and public expenditure, all of which influence real gross domestic product (RGDP). It has been observed that employment affects RGDP, consumption, government spending, and investment. There is also bidirectional causality between consumption, government spending, and RGDP. The estimates of the Ricardian equivalent hypothesis are important. However, today's changing economic policies, declining real incomes, and consumer behavior in the face of ever-increasing inflation require that the theory be redesigned. Therefore, contrary to theoretical predictions, consumers are concerned about maintaining their standard of living rather than directing tax deductions to savings. Contrary to the claims of Keynesian researchers, no causal relationship is observed between public debt and growth in this study. However, public debt directly affects total capital, consumption, government spending, and investment, which are important for sustainable economic policy.https://doi.org/10.1186/s40854-023-00481-7RGDPREHPublic debtGovernment expenditureNorthern CyprusRestricted VAR |
| spellingShingle | Ergin Akalpler Triggering economic growth to ensure financial stability: case study of Northern Cyprus Financial Innovation RGDP REH Public debt Government expenditure Northern Cyprus Restricted VAR |
| title | Triggering economic growth to ensure financial stability: case study of Northern Cyprus |
| title_full | Triggering economic growth to ensure financial stability: case study of Northern Cyprus |
| title_fullStr | Triggering economic growth to ensure financial stability: case study of Northern Cyprus |
| title_full_unstemmed | Triggering economic growth to ensure financial stability: case study of Northern Cyprus |
| title_short | Triggering economic growth to ensure financial stability: case study of Northern Cyprus |
| title_sort | triggering economic growth to ensure financial stability case study of northern cyprus |
| topic | RGDP REH Public debt Government expenditure Northern Cyprus Restricted VAR |
| url | https://doi.org/10.1186/s40854-023-00481-7 |
| work_keys_str_mv | AT erginakalpler triggeringeconomicgrowthtoensurefinancialstabilitycasestudyofnortherncyprus |