The Institutional Fundamentals of Turkey's Economic Performance: A New Institutional Perspective

In this thesis, the effect of Turkey's institutional structure on economic performance is analyzed by using transaction cost and credible commitment which are contributed by New Institutional Economics. According to this school, neoclassical economics ignores transaction cost, bounded rationality, incomplete contracts and property rights. So these models will not represent the real world. But it's known that the transaction cost is always positive in the real world. According to this reality, to begin with the institutions containing the New Institutional Economics are investigated and the relationship between institutions and economic performance is explained. Afterwards defining, measuring and effects of transaction cost topics are mentioned. Soon after we handled the political transaction cost. In the next chapter, the policymaking process and credible commitment are explained. The role of institutions on formation of institutional policies and the 3 determiner legislative-executive-judiciary and the seperation of powers are discussed and credible commitment is clarified in this context. By giving the theoretical framework of this issues, Turkey's progress is reviewed. The important contribution of this thesis is by following New Institutional Economics perspective, first defining the political transaction cost and credible commitment and after showing the effects Turkey's institutional structure to economic performance by using time series analysis with structral breaks. Findings indicate that the transaction cost and credible commitment determined by institutional structure are highly important on investment decisions and national income. Anahtar Kelimeler: New Institutional Economics, Transaction Cost, Credible Commitment, Institutional Structure, Structral Breaks, Co-integration.