Public debt managers have a certain range of borrowing instruments varying in their interest rate type, currency, maturity etc. at their disposal and have to find an appropriate combination of those while raising debt on behalf of the government. In selecting the combination of instruments to be issued, i.e. the borrowing strategy to be pursued for a certain period of time, debt managers need to consider several objectives that are conflicting by their nature, and the uncertainty associated with the outcomes of the decisions made. The objective of this thesis is to propose an approach to support the decision making process regarding sovereign debt issuance. We incorporate Multi-Criteria Decision Making (MCDM) tools using a multi-period stochastic programming model that takes into account sequential decisions concerned with debt issuance policies. The model is then applied for public debt management in Turkey.

In this thesis, sustainability of the Turkish domestic debt is analyzed within the &ldquo / sustainability indicators&rdquo / perspective. The fiscal targets of Maastricht Treaty (1992) are imposed on the Turkish fiscal policy and it is investigated whether these targets are the indicators for sustainability in the medium term. Uctum and Wickens&rsquo / (2000) methodology is followed in assessing the sustainability of the current fiscal policy and the efficiency of the Maastricht Treaty (1992) targets. Moreover, the vector auto regression (VAR) approach of Garcia and Rigobon (2004) is utilized in deriving the econometric model for the debt dynamics of Turkey. The results suggest that domestic debt of Turkey has been unsustainable within 1994-2008. Furthermore, the Maastricht Treaty (1992) fiscal targets are binding for Turkey and gaining more significance in the recent years.

The budget of the European Union has accomplished a significant role for European integration in the history of the Union. However, it has not resulted into anticipated developments compatible with the Union&rsquo / s institutional policy reform process in the last decades. The budget has emerged as a consequence of path dependent developments in its historical progress, which has dragged the European Union to a critical stage. It is rather challenging for the Union now to sustain the current structure of the budget, since it exposes some disadvantages to continue with this structure in an enlarging and deepening Union. In spite of various reform proposals, there is no appropriate theoretical ground for the budgetary politics of the European Union to be channelled through strengthening the link between the Union and European citizens. This thesis attempts to approach the existing problems associated with expenditures and revenues of the current budget from the social constructive policy perspective, in line with the major question of &ldquo / how the budget can be made more socially constructive by utilizing expenditures and revenues?&rdquo / The study has three major objectives. Firstly, it presents a historical evolution of the European Union budget in order to explore path dependent developments inherent to its historical progress. Secondly, it offers a critical analysis on the expenditure and revenue sides of the budget. Thirdly, it introduces a social constructivist policy approach on this subject as an alternative to the most prevalent approach of fiscal federalism.

The exploration of this thesis on public finance proceeds on two axes. First, it aims at developing an ontological perspective to public finance. Accordingly, public finance is defined to be the concrete political relation between the state and society. The thesis that presents a political and historical evaluation of public finance from a critical sociological and political economy approach associates the components of this definition such as public, the political etc. with the relevant debates in social and political theory. In line with this, the traditional harmony-perspective of neoclassical public finance theories, which is ignorant of the political, is criticized, calling it as &lsquo / police finance&rsquo / instead of &lsquo / public finance&rsquo / . Secondly, the thesis explores the history of fiscal thought between the 15th-19th centuries with special reference to the Ottoman Empire. All in all, with these topics this thesis aims at making a contribution to the field of &ldquo / fiscal sociology&rdquo / from a critical sociological and political economy approach.

In this study, stochastic simulation based risk analysis is applied to the government domestic debt stock in Turkey with the motivation to identify the cost and risk characteristics of alternative debt financing strategies. Future path of interest rates is simulated by using the yield curve forecasting framework in Diebold and Li (2002), which is founded on the Nelson-Siegel yield curve model. Yield curve simulation is based on the estimated term structure of interest rates for the period June 2001-July 2004. Simulated yield curves are generally upward sloped and concave. Contrary to the common observation, long-term yields are more volatile compared to short-term yields. Under each financing strategy, debt is rolled over on top of simulated term structure of interest rates. Alternative financing strategies are compared with respect to absolute Cost-at-Risk, relative Cost-at-Risk and relative risk measures computed from the simulated cost distributions. Results of the risk analysis are influenced by the characteristics of the simulated term structure of interest rates and the additional yield imposed on the coupon bonds, which is assumed to reflect risk perception of investors for increased maturity.

This thesis analyzes the debt dynamics of Turkey and assesses the sustainability of fisscal policy. The assessment of fiscal policy follows the methodology of Garcia and Rigobon (2004). This approach focuses on the concept of debt sustainability from a risk management perspective and incorporates the effects of stochastic shocks to the economy in its assessment. The results suggest that a continuation of the present fiscal stances will lead to a fiscal unsustainability in Turkey. Furthermore, the results indicate that the properties of the debt dynamics are closely related to the spreads on both dollar denominated debt and YTL denominated debt. This thesis also provides an application of two traditional methodologies, such as Wilcox&#039 / s (1989) methodology and Uctum and Wicken&#039 / s (2000) methodology in order to assess the fiscal sustainability of Turkey.

This study investigates the validity of the twin deficits hypothesis for the Turkish quarterly data over the 1988:1-2005:2 periods. To this end, we consider a VAR variable space containing budget deficits, current account deficits, real output, real interest rates and real exchange rates and employ cointegration, equilibrium/error correction mechanism techniques along with Granger-non-causality tests and impulse response analyses. The empirical results from decompositions of the budget and current account deficits into their cyclical and structural components suggest that both CAD and BD are counter-cyclical. The twin deficit hypothesis, consistent with the conventional Mundell-Flemming framework, postulates that current account and budget deficits move together in the long run and the causality runs from the former to the latter. The results from Engle-Granger and Johansen cointegration procedures support either the twin divergence or the Ricardian equivalence postulations but not the twin deficits hypothesis. Current account deficits and budget deficits are also found to be jointly endogenous. The short-run impacts of budget deficits on current account deficits are found to be mainly through the real exchange rate and real interest rate channels.

Turkish Compulsory Earthquake Insurance (ZDS) introduced after the 1999 Earthquakes aimed to lower financial burdens of the State and to promote safer building construction. High earthquake risk in Turkey necessitates risk mitigation, in line with the priority of the new international policy. Yet, the ZDS system operates without regard to risk mitigation, and it is far from being a compulsory condition. The ZDS system has low penetration ratios due to expectations of State-aid in the event of a disaster, which arise from perceived attributes of ZDS, according to the findings of the Zeytinburnu household survey. The ZDS system generates social inequalities because purchase of the ZDS contracts is voluntary. This is related to higher social statuses and general insurance purchase behavior, whereas insured homeowners in middle-lower income levels are observed to differ significantly from un-insured homeowners in their perception of the ZDS purchase as &lsquo / compulsory&rsquo / and as a form of &lsquo / social solidarity&rsquo / . Operation of the ZDS disregarding risk mitigation seems to promote fatalistic attitudes andTurkish Compulsory Earthquake Insurance (ZDS) introduced after the 1999 Earthquakes aimed to lower financial burdens of the State and to promote safer building construction. High earthquake risk in Turkey necessitates risk mitigation, in line with the priority of the new international policy. Yet, the ZDS system operates without regard to risk mitigation, and it is far from being a compulsory condition. The ZDS system has low penetration ratios due to expectations of State-aid in the event of a disaster, which arise from perceived attributes of ZDS, according to the findings of the Zeytinburnu household survey. The ZDS system generates social inequalities because purchase of the ZDS contracts is voluntary. This is related to higher social statuses and general insurance purchase behavior, whereas insured homeowners in middle-lower income levels are observed to differ significantly from un-insured homeowners in their perception of the ZDS purchase as &lsquo / compulsory&rsquo / and as a form of &lsquo / social solidarity&rsquo / . Operation of the ZDS disregarding risk mitigation seems to promote fatalistic attitudes and reluctance to conform with requirements of risk mitigation. Low penetration ratio and high earthquake risk threaten efficiency of the ZDS system and does not reduce burdens of the State. Based on survey findings, a more appropriate strategy for the achievement of resilience against earthquakes could be possible through the collaboration of the ZDS system with local administrations. It is observed that by means of a &lsquo / Grant Program&rsquo / , there may be abundant reason and evidence to achieve convertion of the ZDS system from a post-disaster loss compensation mechanism to a predisaster risk reduction benefactor. Supporting municipalities to produce urban risk maps could reduce risks by more accurate estimation of potential losses, and an extended coverage of the ZDS system to urban risks. Relationship analyses between homeowners&rsquo / attributes, perceptions and tendencies toward alternative policies indicate the necessity of introducing policies based risk-rated premiums. Homeowners are observed as requiring technical and financial assistance to take mitigation measures, decisions under individualized conditions, on the other hand, seem to reinforce fatalistic attitudes and reluctance due to the disregard of risk mitigation benefits and ZDS purchase. Waste of public resources and creation of social inequalities could be prevented by enhancing the capacities of local authorities to implement urban risk mitigation plans and community-based projects via a Grant Program. &lsquo / Relationship analyses&rsquo / of the attitudes of homeowners for alternative policies with respect to their attributes and perceptions revealed that a Grant Program could result in the perception of the ZDS system as a form of social solidarity in risk mitigation. This is to reduce fatalistic attitudes, and curb reluctance compared to individualized conditions of insurance purchase. As a result, willingness to mitigate risks through active participation and purchase of ZDS contracts, particularly among homeowners in the middle-lower socio-economic statuses are likely to expand leading to a resilience society.