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Money - Physical Capital Nexus: How Valid Is McKinnon Complementarity Hypothesis In Turkish Economy?


  • Gülbahar Üçler
  • Şerife Özşahin


According to theory of financial liberalization that emphasizes money and physical capital complementarity, increase in real interest rate following liberalization leads to money demand and investment. Validity of this assumption, which is also known as McKinnon complementarity hypothesis, has been tested empirically for various countries undertaken financial liberalization policies. These empirical works shape the policies of countries with regard to their money demand, interest rate and investment. This study investigates the nexus between money demand, interest rate and investment size in Turkey by employing Bound test and ARDL approach over the period 1988Q1-2013Q4. Empirical analysis of this study hints that there is a limited complementary relationship between money and physical capital in Turkish economy.

Suggested Citation

  • Gülbahar Üçler & Şerife Özşahin, 2014. "Money - Physical Capital Nexus: How Valid Is McKinnon Complementarity Hypothesis In Turkish Economy?," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 2(2), pages 1-12, December.
  • Handle: RePEc:anm:alpnmr:v:2:y:2014:i:2:p:1-12

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    More about this item


    Bound Test and ARDL Method; Financial Liberalization; McKinnon Complementary Hypothesis; Money and Physical Capital; Turkey;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls


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