Romanian Journal of Economic Forecasting – 4/2009 101 GROWTH OF PUBLIC EXPENDITURES IN TURKEY DURING THE 1950-2004 PERIOD: AN ECONOMETRIC ANALYSIS Turan YAY  Huseyin TASTAN  Abstract The share of government expenditures in GDP has displayed steady increase in both developed and developing countries during the 20 th century. This observation has led economists to explore the reasons and the underlying mechanism both theoretically and empirically. Several hypotheses on the relationship of public expenditures with income growth, budget deficits and government revenues have been reexamined in the light of recent developments in econometric methods. This study presents results from testing three hypotheses, namely, the Wagner Hypothesis, the Buchanan- Wagner Hypothesis and the Tax-Expenditure Hypothesis, using data from Turkey for the period 1950-2004. In the empirical section we employed time series econometric techniques to analyze long run economic relationships. Several unit root and cointe- gration tests are utilized to see the robustness of results across different methods. Keywords: Public expenditures, Wagner Hypothesis, Buchanan-Wagner Hypothesis, Tax-Expenditure Hypothesis, Turkey JEL Classification: H50, H62, C51 Introduction Beginning in the second half of the 20th century, economists have started to focus on the reasons of the dramatic increase in public expenditures in both developed and developing countries. As stated by Peacock and Wiseman (1967:12), until the 1950s, public economics theory was only a taxation theory. The growth of the number of studies on public expenditures is closely related to the observation that the share of public expenditures in GNP has risen rapidly in many developed countries. Before the World War I, the share of government expenditures in GDP in main developed  Professor of Economics, Yildiz Technical University, Department of Economics, 34349, Yildiz, Istanbul, Turkey. (yay@yildiz.edu.tr ).  Associate Professor of Economics, Yildiz Technical University, Department of Economics, 34349, Istanbul, Turkey. (tastan@yildiz.edu.tr ). 6.