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A Structural VAR Analysis of the Determinants of Capital Flows Into Turkey

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  • Ali Askin Culha
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    Abstract

    Since the beginning of 1990s, Turkey has been exposed to large amounts of capital flows with significant effects on the economic performance. This study examines the determinants of capital flows into Turkey in the traditional ‘push-pull’ factors approach. To this end, a structural vector autoregression (SVAR) model has been employed and impulse-response and variance decomposition functions have been produced covering the period from 1992 : 01 to 2005 : 12. The same analysis has also been carried out for the two sub-periods 1992 : 01-2001 : 12 and 2002:01-2005 : 12 to inspect if there exists a change in the roles of push and pull factors before and after the 2001 economic crisis. The empirical evidence suggests that the relative roles of some of the factors have changed considerably in the post crisis period and pull factors are in general dominant over push factors in determining capital flows into Turkey.

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    File URL: http://www.tcmb.gov.tr/research/discus/WP0605ENG.pdf
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    Bibliographic Info

    Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0605.

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    Date of creation: 2006
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    Handle: RePEc:tcb:wpaper:0605

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    Keywords: Capital Flows; Push and Pull Factors; Structural Vector Autoregression;

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    1. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    2. Taylor, Mark P & Sarno, Lucio, 1997. "Capital Flows to Developing Countries: Long- and Short-Term Determinants," World Bank Economic Review, World Bank Group, vol. 11(3), pages 451-70, September.
    3. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
    4. Yung-Hsiang Ying & Yoonbai Kim, 2001. "An Empirical Analysis on Capital Flows: The Case of Korea and Mexico," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 954-968, April.
    5. Kim, Yoonbai, 2000. "Causes of capital flows in developing countries," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 235-253, April.
    6. C. Emre Alper, Ismail Saglam, 2001. "The Transmission of a Sudden Capital Outflow: Evidence from Turkey," Eastern European Economics, M.E. Sharpe, Inc., vol. 39(2), pages 29-48, March.
    7. Fernandez-Arias, Eduardo & Montiel, Peter J, 1996. "The Surge in Capital Inflows to Developing Countries: An Analytical Overview," World Bank Economic Review, World Bank Group, vol. 10(1), pages 51-77, January.
    8. Glenn Hoggarth and Gabriel Sterne, 1997. "Capital Flows: Causes, Consequences and Policy Responses," Handbooks, Centre for Central Banking Studies, Bank of England, number 14.
    9. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
    10. Dasgupta, Dipak & Ratha, Dilip, 2000. "What factors appear to drive private capital flows to developing countries? and how does official lending respond?," Policy Research Working Paper Series 2392, The World Bank.
    11. Mody, Ashoka & Taylor, Mark P & Kim, Jung Yeon, 2001. "Modelling Fundamentals for Forecasting Capital Flows to Emerging Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 201-16, July.
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    Cited by:
    1. Coskun, Yener, 2010. "An Analysis of the Strenghts and Weaknesses of the Turkish Real Estate Market," MPRA Paper 28361, University Library of Munich, Germany.

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