A welfare policy analysis in the Turkish economy: A simulation based macroeconomic application of the deficit financing policies

In this study, by including 15 production sectors and linking real and financial sub-models through various channels of fund flows, interest rates, commercial bank intermediation, monetary and fiscal policies, a financial computable general equilibrium (CUE) model, which represents salient features of the Turkish economy, is formulated and counterfactual simulations are performed to explore the question of how changing the government deficit financing options affects the stakeholders and macroeconomic variables in the Turkish economy under both fixed and flexible interest rate regimes. In the benchmark, treasury bonds and central bank credits finance a certain percentage of the government deficit. In the deficit financing simulation scenario, the proportion financed by treasury bonds is increased while the proportion financed by the central bank is decreased under both fixed and flexible interest rate regimes to observe the effects of policy changing. Our simulation results show that d