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Financial Globalization, the Democratic Deficit, and Recurrent Crises in Emerging Markets : The Turkish Experience in the Aftermath of Capital Account Liberalization

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  • C. EMRE ALPER
  • ZIYA ONIS

Abstract

Financial globalization offers both risks and benefits for countries of the semiperiphery or "emerging markets." Politics within the national space matters, yet acquires a new meaning, in the age of financial globalization. "Weak democracies" are characterized by limited accountability and transparency of the state and other key political institutions. Such democracies tend to suffer from populist cycles, which result in a low capacity to carry out economic reform. Financial globalization, in turn, magnifies populist cycles and renders their consequences more severe. Hence, "weak democracies" are confronted with the predominantly negative side of financial globalization, which includes overdependence on short-term capital flows, speculative attacks, and recurrent financial crises leading to slow growth and a more regressive income distributional profile. The relevance of these sets of propositions are illustrated with reference to the case of Turkey, which, indeed, experienced recurrent financial crises in the post-capital account liberalization era, with costly consequences for the real economy. Two general conclusions follow. First, there is a need to strengthen democracy in the developing world. Second, since this is hard to accomplish over a short period of time, serious questions are raised concerning the desirability of early exposure to financial globalization given the current state of the world.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 39 (2003)
Issue (Month): 3 (May)
Pages: 5-26

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Handle: RePEc:mes:emfitr:v:39:y:2003:i:3:p:5-26

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

Related research

Keywords: budgetary performance; capital account; emerging markets; populism;

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Cited by:
  1. Alice Sindzingre, 2003. "Liberalisation, Multilateral Institutions and Public Policies : The Issue of Sovereignty In Sub-Saharan Africa," Mondes en développement, De Boeck Université, vol. 123(3), pages 23-56.
  2. H. Al & Ahmet Faruk Aysan, 2006. "Assessing the Preconditions in Establishing an Independent Regulatory and Supervisory Agency in Globalized Financial Markets: The Case of Turkey," Working Papers 2006/06, Bogazici University, Department of Economics.
  3. World Bank, 2003. "Turkey : Corporate Sector Impact Assessment Report," World Bank Other Operational Studies 14870, The World Bank.
  4. C. Emre Alper & Ziya Onis, 2002. "Emerging Market Crises and the IMF: Rethinking the Role of the IMF in the Light of Turkey's 2000-2001 Financial Crises," Working Papers 2002/03, Bogazici University, Department of Economics.
  5. Levent Korap, 2006. "An Analysis of Central Bank Interventions on Forex Market For The Post-Crisis Period," Working Papers 2006/4, Turkish Economic Association.
  6. Mete Feridun, 2009. "Determinants of Exchange Market Pressure in Turkey: An Econometric Investigation," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 45(2), pages 65-81, March.
  7. Alper, Emre & Hatipoglu, Ozan, 2009. "The Conduct of Monetary Policy in Turkey in the Pre- and Post-crisis Period of 2001 in Comparative Perspective: a Case for Central Bank Independence," MPRA Paper 18426, University Library of Munich, Germany.
  8. A. Faruk Aysan & M. Disli & K. Schoors, 2013. "Bank Competition and Outreach: Evidence from Turkey," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/839, Ghent University, Faculty of Economics and Business Administration.
  9. Karahasan, Burhan Can, 2009. "Financial Liberalization and Regional Impacts on Entrepreneurial Behavior in Turkey," MPRA Paper 29814, University Library of Munich, Germany, revised 2011.
  10. Hatipoglu, Ozan & Alper, C. Emre, 2007. "Estimating Central Bank Behavior in Emerging Markets: The Case of Turkey," MPRA Paper 7107, University Library of Munich, Germany, revised Jan 2008.

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