IDEAS home Printed from
   My bibliography  Save this article

The Re‐making of the Turkish Crisis


  • Özgür Orhangazi
  • A. Erinç Yeldan


By the end of 2018 Turkey had entered a new economic crisis and a lengthy recession period. In contrast to the previous financial crises of 1994, 2001 and 2009, when the economy shrank abruptly with a spectacular collapse of asset values and a severe contraction of output, the 2018 economic crisis was characterized by a prolonged recession with persistent low (negative) rates of growth, dwindling investment performance, debt repayment problems, secularly rising unemployment, spiralling currency depreciation and high inflation. The mainstream approach attributes this dismal performance to a lack of ‘structural reforms’ and/or exogenous policy factors. However, this analysis shows that the underlying sources of the crisis are to be found not in the conjunctural cycles of reform fatigue, but rather in the post‐2001, neoliberal, speculation‐led growth model that relied excessively on hot‐money inflows and external debt accumulation. This article argues that following the post‐2001 orthodox reforms, a foreign capital inflow‐dependent, debt‐led and construction‐centred economic growth model dominated the economy and caused a long build‐up of imbalances and increased fragilities that led to the 2018 crisis. The Covid‐19 pandemic of 2020‒21 further exposed these fragilities, pushing the economy back into a recession with rapid capital outflows causing another round of sharp currency depreciation.

Suggested Citation

  • Özgür Orhangazi & A. Erinç Yeldan, 2021. "The Re‐making of the Turkish Crisis," Development and Change, International Institute of Social Studies, vol. 52(3), pages 460-503, May.
  • Handle: RePEc:bla:devchg:v:52:y:2021:i:3:p:460-503
    DOI: 10.1111/dech.12644

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item

    References listed on IDEAS

    1. Philip R. Lane & Peter McQuade, 2014. "Domestic Credit Growth and International Capital Flows," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 218-252, January.
    2. Esteban Pérez Caldentey & Matías Vernengo, 2015. "Towards an understanding of crisis episodes in Latin America: a post-Keynesian approach," Review of Keynesian Economics, Edward Elgar Publishing, vol. 3(2), pages 158-180, April.
    3. Ozgur Orhangazi, 2002. "Turkey: bankruptcy of neoliberal policies and the possibility of alternatives," Review of Radical Political Economics, Union for Radical Political Economics, vol. 34(3), pages 335-341, September.
    4. Robin Koepke, 2019. "What Drives Capital Flows To Emerging Markets? A Survey Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 516-540, April.
    5. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016064, November.
    6. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    7. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107627314, November.
    8. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016040, November.
    9. Berk Esen & Sebnem Gumuscu, 2016. "Rising competitive authoritarianism in Turkey," Third World Quarterly, Taylor & Francis Journals, vol. 37(9), pages 1581-1606, September.
    10. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.
    11. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107638105, November.
    12. Maria N. Ivanova, 2017. "Profit growth in boom and bust: the Great Recession and the Great Depression in comparative perspective," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(1), pages 1-20.
    13. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107016057, November.
    14. Ihsan Yilmaz & Galib Bashirov, 2018. "The AKP after 15 years: emergence of Erdoganism in Turkey," Third World Quarterly, Taylor & Francis Journals, vol. 39(9), pages 1812-1830, September.
    15. Özgür Orhangazi, 2014. "Capital Flows and Credit Expansions in Turkey," Review of Radical Political Economics, Union for Radical Political Economics, vol. 46(4), pages 509-516, December.
    16. Annina Kaltenbrunner & Juan Pablo Painceira, 2015. "Developing countries’ changing nature of financial integration and new forms of external vulnerability: the Brazilian experience," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1281-1306.
    17. Acemoglu,Daron & Arellano,Manuel & Dekel,Eddie (ed.), 2013. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9781107674165, November.
    18. Gabriel Palma, 2001. "Three-and-a-half Cycles of ‘Mania, Panic, and [Asymmetric] Crash’: East Asia and Latin America Compared," Palgrave Macmillan Books, in: Ha-Joon Chang & Gabriel Palma & D. Hugh Whittaker (ed.), Financial Liberalization and the Asian Crisis, chapter 15, pages 254-286, Palgrave Macmillan.
    19. Palma, J. G., 2012. "How the full opening of the capital account to highly liquid financial markets led Latin America to two and a half cycles of ‘mania, panic and crash’," Cambridge Working Papers in Economics 1201, Faculty of Economics, University of Cambridge.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mehmet Ulug & Sayım Işık & Mehmet Mert, 2023. "The effectiveness of ultra-loose monetary policy in a high inflation economy: a time-varying causality analysis for Turkey," Economic Change and Restructuring, Springer, vol. 56(4), pages 2855-2887, August.
    2. Jungmann, Benjamin, 2021. "Growth drivers in emerging capitalist economies before and after the Global Financial Crisis," IPE Working Papers 172/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Hadi, Dlawar Mahdi & Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M., 2023. "Turkish Lira crisis and its impact on sector returns," Finance Research Letters, Elsevier, vol. 52(C).
    4. Ugurlu, Esra Nur, 2023. "Sectoral implications of policy induced household credit expansions," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 14-31.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jerzmanowski, Michal & Tamura, Robert, 2019. "Directed technological change & cross-country income differences: A quantitative analysis," Journal of Development Economics, Elsevier, vol. 141(C).
    2. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2016. "Small open economies in the vast oceanof global high finance," Economics wp73, Department of Economics, Central bank of Iceland.
    3. Anzuini, Alessio & Rossi, Luca & Tommasino, Pietro, 2020. "Fiscal policy uncertainty and the business cycle: Time series evidence from Italy," Journal of Macroeconomics, Elsevier, vol. 65(C).
    4. Bjarni G. Einarsson & Kristófer Gunnlaugsson & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2016. "The long history of financial boom-bust cycles in Iceland - Part II: Financial cycles," Economics wp72, Department of Economics, Central bank of Iceland.
    5. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    6. Wen Xu, 2016. "Estimation of Dynamic Panel Data Models with Stochastic Volatility Using Particle Filters," Econometrics, MDPI, vol. 4(4), pages 1-13, October.
    7. Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2018. "Firms and Economic Performance: A view from Trade," Working Papers 1034, Barcelona School of Economics.
    8. Guriev, Sergei & Treisman, Daniel, 2020. "A theory of informational autocracy," Journal of Public Economics, Elsevier, vol. 186(C).
    9. Ufuk Akcigit & Sina T. Ates & Giammario Impullitti, 2018. "Innovation and Trade Policy in a Globalized World," NBER Working Papers 24543, National Bureau of Economic Research, Inc.
    10. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    11. Makoto Shimoji, 2016. "Rationalizable Persuasion," Discussion Papers 16/08, Department of Economics, University of York.
    12. Guerini, Mattia & Moneta, Alessio & Napoletano, Mauro & Roventini, Andrea, 2020. "The Janus-Faced Nature Of Debt: Results From A Data-Driven Cointegrated Svar Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 24-54, January.
    13. Ivan Balbuzanov, 2019. "Lies and consequences," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(4), pages 1203-1240, December.
    14. Raphael Corbi & Fabio Miessi Sanches, 2022. "Church Competition, Religious Subsidies and the Rise of Evangelicalism: a Dynamic Structural Analysis," Working Papers, Department of Economics 2022_09, University of São Paulo (FEA-USP).
    15. Shirai, Daichi, 2016. "Persistence and Amplification of Financial Frictions," MPRA Paper 72187, University Library of Munich, Germany.
    16. repec:hal:spmain:info:hdl:2441/lmb2g91ru9ipp4r5ubgh2jjtr is not listed on IDEAS
    17. Haiwen Zhou, 2018. "Impact of international trade on unemployment under oligopoly," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(4), pages 365-379, May.
    18. Benchimol, Jonathan & Ivashchenko, Sergey, 2021. "Switching volatility in a nonlinear open economy," Journal of International Money and Finance, Elsevier, vol. 110(C).
    19. Lefgren, Lars J. & Stoddard, Olga B. & Stovall, John E., 2021. "Rationalizing self-defeating behaviors: Theory and evidence," Journal of Health Economics, Elsevier, vol. 76(C).
    20. Liang, Yan, 2022. "Impact of financial development on outsourcing and aggregate productivity," Journal of Development Economics, Elsevier, vol. 154(C).
    21. Andrzej Rzonca & Piotr Cizkowicz, 2014. "The effects of unconventional monetary policy: what do central banks not include in their models? / Skutki niekonwencjonalnej polityki pieniê¿nej: czego banki centralne nie uwzglêdniaj¹w swoich modela," mBank - CASE Seminar Proceedings 131, CASE-Center for Social and Economic Research.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:devchg:v:52:y:2021:i:3:p:460-503. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.