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Public policy and private investment in Turkey


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  • Chhibber, Ajay
  • van Wijnbergen, Sweder


Developing countries trying to emerge from recessionary spirals must recognize the importance of public/private interactions in designing growth oriented adjustment programs. They must appreciate the complex impact of fiscal policy on the economy. Turkey is an interesting country for studying how public policy can stimulate private investment. The reason, is that unlike other high debt countries, Turkey has managed to increase the rate of investment in recent years despite external constraints and high real interest rates. Turkey's strategy nevertheless has limits. The surges in public investment in 1986 and 1987 have since hurt macro stability. Private investment has tilted toward such non-tradables as housing - partly as a result of special credit schemes directed at mass housing and partly because housing investment is an attractive investment against inflation. Unless corrected, this shift could hurt future export prospects.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 120.

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Date of creation: 31 Oct 1988
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Handle: RePEc:wbk:wbrwps:120

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Keywords: Financial Intermediation; Trade and Regional Integration; International Terrorism&Counterterrorism; Economic Theory&Research; Environmental Economics&Policies;


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  1. Elliott, J W, 1973. "Theories of Corporate Investment Behavior Revisited," American Economic Review, American Economic Association, American Economic Association, vol. 63(1), pages 195-207, March.
  2. van Wijnbergen, Sweder, 1989. "External Debt, Inflation, and the Public Sector: Toward Fiscal Policy for Sustainable Growth," World Bank Economic Review, World Bank Group, World Bank Group, vol. 3(3), pages 297-320, September.
  3. Eisner, Robert, 1970. "Tax Policy and Investment Behavior: Further Comment," American Economic Review, American Economic Association, American Economic Association, vol. 60(4), pages 746-52, September.
  4. van Wijnbergen, S., 1982. "Stagflationary effects of monetary stabilization policies : A quantitative analysis of South Korea," Journal of Development Economics, Elsevier, Elsevier, vol. 10(2), pages 133-169, April.
  5. Jorgenson, Dale W, 1971. "Econometric Studies of Investment Behavior: A Survey," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 9(4), pages 1111-47, December.
  6. Chhibber, Ajay & Khalilzadeh-Shirazi, Javad, 1988. "Public finance in adjustment programs," Policy Research Working Paper Series 128, The World Bank.
  7. Eisner, Robert, 1972. "Components of Capital Expenditures: Replacement and Modernization Versus Expansion," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 297-305, August.
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Cited by:
  1. Eshun, Maame Esi & Adu, George & Buabeng, Emmanuel, 2014. "THE financial determinants of private investment in ghana," MPRA Paper 57570, University Library of Munich, Germany.
  2. Ahmad, Imtiaz & Qayyum, Abdul, 2009. "Role of Public Expenditures and Macroeconomic Uncertainty in Determining Private Investment in Large Scale Manufacturing Sector of Pakistan," MPRA Paper 29268, University Library of Munich, Germany.
  3. Ahmed Badawi, 2003. "Private capital formation and public investment in Sudan: testing the substitutability and complementarity hypotheses in a growth framework," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(6), pages 783-799.
  4. Chhibber, Ajay & Dailami, Mansoor, 1990. "Fiscal policy and private investment in developing countries : recent evidence on key selected issues," Policy Research Working Paper Series 559, The World Bank.
  5. Matin, Kazi M. & Wasow, Bernard, 1992. "Adjustment and private investment in Kenya," Policy Research Working Paper Series 878, The World Bank.
  6. Oner Guncavdi-super-˙ & Andrew McKay, 2003. "Macroeconomic adjustment and private manufacturing investment in Turkey: a time-series analysis," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(18), pages 1901-1909.
  7. Öner Günçavdi & Michael Bleaney & Andrew McKay, 1999. "The response of private investment to structural adjustment-a case study of Turkey," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(2), pages 221-239.
  8. Krishna Rao Akkina & Mehmet Ali Celebi, 2002. "The Determinants of Private Fixed Investment and the Relationship between Public and Private Capital Accumulation in Turkey," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 41(3), pages 243-254.


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