IDEAS home Printed from https://ideas.repec.org/a/tcb/cebare/v13y2013i3p25-44.html
   My bibliography  Save this article

The Effects of the Investment Decline on Potential GDP in Turkey’s 2001 and 2009 Crises

Author

Listed:
  • Ufuk Demiroglu

Abstract

Investment tends to fall dramatically in economic crises, which slows down the growth of the capital stock and thereby potential GDP. This note estimates the extent of such slowdown in the Turkish crises of 2001 and 2009. Capital growth fell significantly in both crises below its 1987-2011 average, but the fall in the 2001 crisis was deeper and much more persistent. The accumulated loss of capital arising from those two episodes of below-average growth is about 11% and 4% (of the trend level), respectively, in the 2001 and 2009 crises. The corresponding potential GDP losses are respectively about 6% and 2% of GDP. The loss in 2009, in addition to being smaller, was recovered much faster than in 2001. In the 4th year after the onset of the crisis, the 2009 crisis loss was recovered by about two-thirds, while the recovery of the 2001 crisis loss had barely begun in the 4th year. The limited nature of the loss in potential GDP in the 2009 crisis played a crucial role in ensuring that the ensuing rapid post-crisis recovery did not cause "overheating".

Suggested Citation

  • Ufuk Demiroglu, 2013. "The Effects of the Investment Decline on Potential GDP in Turkey’s 2001 and 2009 Crises," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(3), pages 25-44.
    • Handle: RePEc:tcb:cebare:v:13:y:2013:i:3:p:25-44
    as

    Download full text from publisher

    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2013/Volume+13-3/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:cbo:report:418805 is not listed on IDEAS
    2. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    3. repec:cbo:report:418806 is not listed on IDEAS
    4. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    5. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    6. repec:cbo:report:418804 is not listed on IDEAS
    7. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    8. Congressional Budget Office, 2010. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020," Reports 41880, Congressional Budget Office.
    9. Chang-Tai Hsieh, 2002. "What Explains the Industrial Revolution in East Asia? Evidence From the Factor Markets," American Economic Review, American Economic Association, vol. 92(3), pages 502-526, June.
    10. repec:cbo:report:418807 is not listed on IDEAS
    11. Tiryaki S. Tolga, 2012. "Interest Rates and Real Business Cycles in Emerging Markets," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-30, January.
    Full references (including those not matched with items on IDEAS)

    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. Daniel J. Wilson, 2010. "Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act," Working Paper Series 2010-17, Federal Reserve Bank of San Francisco.
    2. Gerhards, Eva & Goerl, Caroline-Antonia & Thöne, Michael, 2012. "Tragfähigkeit der öffentlichen Finanzen: Eine Bestandsaufnahme national und international praktizierter Methoden der langfristigen Budgetanalyse [Sustainability of Public Finances: A review of inte," FiFo Reports - FiFo-Berichte 14, University of Cologne, FiFo Institute for Public Economics.
    3. Nicoletta Batini & Julia Guerreiro & Giovanni Callegari, 2011. "“An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?”," IMF Working Papers 2011/072, International Monetary Fund.
    4. Dimitri B. Papadimitriou & Greg Hannsgen, 2010. "Debts, Deficits, Economic Recovery, and the U.S. Government," Economics Public Policy Brief Archive ppb_114, Levy Economics Institute.
    5. Willem Van Zandweghe, 2010. "Why have the dynamics of labor productivity changed?," Economic Review, Federal Reserve Bank of Kansas City, vol. 95(Q III), pages 5-30.
    6. Peter Boone & Simon Johnson, 2014. "Forty Years of Leverage: What Have We Learned about Sovereign Debt?," American Economic Review, American Economic Association, vol. 104(5), pages 266-271, May.
    7. Fischer, Carolyn & Fox, Alan K., 2012. "Climate policy and fiscal constraints: Do tax interactions outweigh carbon leakage?," Energy Economics, Elsevier, vol. 34(S2), pages 218-227.
    8. Toptancı, Ali İskan, 2021. "RETRACTED PAPER: "The Effects of Protectionism Developed after the Great Depression on Global Trade: A Macroeconomic Analysis"," EconStor Research Reports 228521, ZBW - Leibniz Information Centre for Economics.
    9. Jorgenson, Dale W. & Goettle, Richard J. & Ho, Mun S. & Wilcoxen, Peter J., 2013. "Energy, the Environment and US Economic Growth," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 477-552, Elsevier.
    10. William R. Cline, 2014. "Sustainability of Public Debt in the United States and Japan," Working Paper Series WP14-9, Peterson Institute for International Economics.
    11. International Monetary Fund, 2010. "United States: Selected Issues Paper," IMF Staff Country Reports 2010/248, International Monetary Fund.
    12. F. Arizala & E. Cavallo & A. Galindo, 2013. "Financial development and TFP growth: cross-country and industry-level evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 23(6), pages 433-448, March.
    13. Knapek, George M. & Richardson, James W. & Outlaw, Joe L. & Raulston, J. Marc, 2011. "Investigating the Redundancies in Current Farm Programs," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98841, Southern Agricultural Economics Association.
    14. Justin Doran & Bernard Fingleton, 2014. "Economic shocks and growth: Spatio-temporal perspectives on Europe's economies in a time of crisis," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 137-165, November.
    15. Juan José Echavarría & Andrés González, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, December.
    16. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    17. Caruso, Alberto & Reichlin, Lucrezia & Ricco, Giovanni, 2019. "Financial and fiscal interaction in the Euro Area crisis: This time was different," European Economic Review, Elsevier, vol. 119(C), pages 333-355.
    18. José Osler Alzate Mahecha, 2013. "Sudden stops in emerging markets: How to minimize their impact on GDP?," Documentos CEDE 10547, Universidad de los Andes, Facultad de Economía, CEDE.
    19. Chang Woon Nam & Jan Schumacher, 2014. "Dynamics and Time Frameof Post War Recovery Required for Compensating Civil War Economic Losses," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(03), pages 79-87, August.
    20. Michiel Bijlsma & Wouter Elsenburg & Michiel van Leuvensteijn, 2010. "Four Futures for Finance; A scenario study," CPB Document 211.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

    Turkish Economy; Capital Stock in Turkey; Turkish Capital Services Index; 2001 Crisis; 2009 Crisis;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    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:tcb:cebare:v:13:y:2013:i:3:p:25-44. 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: the person in charge or the person in charge or the person in charge or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tcmgvtr.html .

    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.