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Effects of International Capital Inflows on the Turkish Economy

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  • AHMET ÇIMENOGLU
  • NURHAN YENTÜRK

Abstract

The main objective of this study is to investigate the effects of international capital inflows on the Turkish economy. Capital inflows, it is argued, can trigger both private consumption and investment expenditures. Increased consumption demand results in an increase in the relative prices of nontradable sectors with respect to tradable sectors. This eventually leads to a change in the composition of investments in favor of nontradable at the expense of tradable sectors. Increased investment in nontradable sectors does not contribute to the foreign exchange earning capacity of a country, and, given such, a country eventually becomes more vulnerable to currency shock. This can trigger major problems, such as significant capital outflows, large current account deficits, currency crisis, and economic contraction.

Suggested Citation

  • Ahmet Çimenoglu & Nurhan Yentürk, 2005. "Effects of International Capital Inflows on the Turkish Economy," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 90-109, January.
    • Handle: RePEc:mes:emfitr:v:41:y:2005:i:1:p:90-109
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    Cited by:

    1. Nuri Yildirim & Huseyin Tastan, 2012. "Capital Flows and Economic Growth across Spectral requencies: Evidence from Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 441-462, September.

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