INTERNATIONAL EFFECTS OF FISCAL POLICIES

Abstract

This study is based on Laursen-Metzler model. This study analyzes, within the framework of Metzler's open economy model, the effects of changes in propensity of investment and propensity of consumption of an importer country on the export volume of the trade partner country, and the impact of the importing country's fiscal policies on the exporting country's national income level, in an international trade relationship. Through econometric models developed according to these criterias, it is tested if the fiscal policies of importer trading partners, which have a significant share in the export activities of trade partner countries, have international effects on the exporting country by using econometric models where Türkiye is the exporting country and the total economy of EU member countries is the importing country. In this time series analysis, impulse-response analysis and variance decomposition method are used. The empirical analysis demonstrated that changes in the total consumption and total investment levels of European Union countries affect Türkiye’s export volume, and that the cumulative effects of EU fiscal policies spread to the Turkish economy through foreign trade, causing changes in Türkiye’s national income level.