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Anatomy of a Failed IMF Program : The 1999 Program in Turkey

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  • GÖKHAN ÇAPOG¬LU

Abstract

This paper analyzes the failed IMF program in Turkey that was initiated in December 1999. The 1999 Turkish exchange rate-based stabilization program was presented as an improved version of earlier programs implemented in Latin American countries. The inclusion of an exit strategy was considered as an innovative element of the Turkish program. However, the program crashed fourteen months after its initiation. This paper argues that the Turkish program underestimated the possible negative impact of unfavorable initial conditions, especially conditions of an institutional nature, which turned out to be a fatal mistake. Among the conditions that were ignored by the 1999 program were the absence of an independent and effective regulatory agency in the banking sector and the circumstances under which the Treasury carried out its borrowing.

Suggested Citation

  • Gökhan Çapog¬Lu, 2004. "Anatomy of a Failed IMF Program : The 1999 Program in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(3), pages 84-100, May.
  • Handle: RePEc:mes:emfitr:v:40:y:2004:i:3:p:84-100
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    References listed on IDEAS

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    1. Daniel Leigh & Marco Rossi, 2002. "Leading Indicators of Growth and Inflation in Turkey," IMF Working Papers 02/231, International Monetary Fund.
    2. By A. Javier Hamann, 2001. "Exchange-Rate-Based Stabilization: A Critical Look at the Stylized Facts," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-4.
    3. Evrensel, Ayse Y., 2002. "Effectiveness of IMF-supported stabilization programs in developing countries," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 565-587, October.
    4. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Would "Cold Turkey" Work in Turkey?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 493-509, November.
    5. Rudiger Dornbusch, 1997. "Brazil's Incomplete Stabilization and Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 367-404.
    6. Yuri V Sobolev, 2000. "Exchange-Rate-Based Stabilization; A Model of Financial Fragility," IMF Working Papers 00/122, International Monetary Fund.
    7. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
    8. Amann, Edmund & Baer, Werner, 2000. "The Illusion of Stability: The Brazilian Economy Under Cardoso," World Development, Elsevier, vol. 28(10), pages 1805-1819, October.
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    Cited by:

    1. Serkan Imisiker & Umit Ozlale, 2008. "Assessing Selectivity and Market Timing Performance of Mutual Funds for an Emerging Market: The Case of Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(2), pages 87-99, March.

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