Testing the Validity of Wagner's Law: 1998-2004, The Case of Turkey

The relationship between public expenditures and GDP is an important issue. The direction of causation of this relationship affects macroeconomic variables. According to Wagner's Law an increase on GDP increases the public expenditures. Unlike the Wagner's Law, Keynes argues that an increase on public expenditures provides growth of GDP. In this study, the direction of relationship between public expenditures and growth of GDP for Turkish economy has been examined. In order to reach an empirical conclusion, the validity of Wagner's Law for Turkey was tested by using econometric models.