THE ECONOMETRIC ANALYSIS OF THE RELATIONSHIP BETWEEN PUBLIC BORROWING AND ECONOMIC GROWTH ON FUNCTIONAL FINANCE: TURKEY EXAMPLE

Based on General Theory of Keynes, in the approach of functional finance asserted by Abba P. Lerner, policy evaluations need to be defended to be carried out by looking at the effect and the results of the financial instruments. According to functional finance approach, taxation needs to be applied for not to finance public expenditures but to create money for state money. Again, it is emphasized that public borrowing needs not to be limited as a fiscal policy means and as long as total demand and total proceeds harmonize, public debt limit don’t have any importance. Price stability and full employment in the functional finance approach, government needs to be given a more active role. Testing public borrowing which is one of the fundamental arguments of functional finance doesn’t affect economic growth is the main target of this study. Within this context, the causality relationship between economic growth and public borrowing specific to Turkey for the periods of 1990 and 2016 was tested. The results of the tests which were carried out by being used the causality analyze of Granger have the characteristics of affirming the foresights of functional finance approach. Findings obtained reveal that there is a causality relationship between public borrowing and economic growt