A Tale of Three Crises in Turkey: 1994, 2001 and 2008–09

Developing countries have encountered many economic crises since the 1980s, due mainly to structural problems related to their integration into the global economy. The Turkish economy is by no means an exception, and suffered significantly from the crises of 1994, 2001 and 2008–09. This paper investigates the tales of these three crises to shed light on the propagation mechanisms of crises and their implications for developing countries, given the Turkish experience. Our study is aiming at complementing existing studies by giving a very broad comparative picture of the main macroeconomic trends before and after the crises at the expense of ignoring many important details explained in other studies. This comparison can be also useful for understanding possible (and under current conditions highly unavoidable) implications of current developments in Turkish economy. Although there are many differences in the emergence of recent crises in Turkey, significant similarities can be found between the 1994 and 2001 crises. The crisis of 2008–09 can be considered exceptional in many aspects. The first two episodes were deemed to be mostly finance-led and finance-driven, with repercussions on the real sectors thereafter; but the 2008–09 crisis was a fully-fledged real sector crisis from the beginning, amid a direct collapse in employment and real economic productivity.