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Testing the Validity of Financial Liberalization Policies under the Framework of McKinnon’s Complementarity Hypothesis: The Case of Turkey


  • Aycan Hepsag


The aim of this study is to investigate the validity of McKinnon’s complementarity hypothesis that puts forward by McKinnon (1993) and Shaw (1973) for Turkish economy. In the analysis the method of Dynamic Ordinary Least Squares (DOLS) that developed by Stock and Watson (1993) and the cointegration test that developed by Shin (1994) are used for the sample period that covers 1980–2007. In respect of the empirical findings, within the framework of the financial liberalization policies, raising the interest rates have positive effect on savings and loanable funds however have no positive effect on investments. Accordingly, it is understood that the McKinnon’s complementarity hypothesis is not a valid hypothesis for Turkish economy

Suggested Citation

  • Aycan Hepsag, 2009. "Testing the Validity of Financial Liberalization Policies under the Framework of McKinnon’s Complementarity Hypothesis: The Case of Turkey," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 3(1), pages 63-80.
  • Handle: RePEc:bdd:journl:v:3:y:2009:i:1:p:63-80

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    References listed on IDEAS

    1. Denis, David J. & Osobov, Igor, 2008. "Why do firms pay dividends? International evidence on the determinants of dividend policy," Journal of Financial Economics, Elsevier, vol. 89(1), pages 62-82, July.
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    More about this item


    McKinnon’s Complementarity Hypothesis; Dynamic Ordinary Least Squares (DOLS); Shin’s Cointegration Test;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General


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