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Borrowing Constraints and Savings in Turkey

Author

Listed:
  • Sumru Altug

    (Koc University, Istanbul and Centre for Economic Policy Research, London)

  • Melih Can Firat

    (Johns Hopkins University, Maryland)

Abstract

The Turkish macroeconomic experience since 2002 has been characterized by three striking trends: (1) an accelerated growth rate of income, (2) a sharp decline in the real interest rate, and (3) a sustained fall in the saving rate of different age-groups. During the same period, there has also been a significant increase in access to credit by Turkish households. In this paper, we argue that a model which incorporates a borrowing constraint mechanism together with the observed increases in the expected growth rate of income and the substantial declines in the real interest rate is able to explain the change in saving across cohorts in Turkey over the last decade. We provide both micro-level evidence on the age-saving profile for Turkey as well as quantitative results from a simple three-period OLG framework with borrowing constraints to account for the change in the saving rate for different age-groups between 2004 and 2014.

Suggested Citation

  • Sumru Altug & Melih Can Firat, 2018. "Borrowing Constraints and Savings in Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1804, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1804
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1804.pdf
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    References listed on IDEAS

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    1. Nicolas Coeurdacier & Stéphane Guibaud & Keyu Jin, 2015. "Credit Constraints and Growth in a Global Economy," American Economic Review, American Economic Association, vol. 105(9), pages 2838-2881, September.
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    Cited by:

    1. Isil Erol, 2019. "New Geographies of Residential Capitalism: Financialization of the Turkish Housing Market Since the Early 2000s," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 43(4), pages 724-740, July.

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    More about this item

    Keywords

    Borrowing constraints; life-cycle household saving; nonlinear estimation; Turkey.;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I20 - Health, Education, and Welfare - - Education - - - General

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