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The Re‐making of the Turkish Crisis

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  • Özgür Orhangazi
  • A. Erinç Yeldan

Abstract

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
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    References listed on IDEAS

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    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.

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