IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Trade Liberalization, Financial Development and Economic Growth in The Long Term: The Case of Turkey

Listed author(s):
  • Kar Muhsin

    (Faculty of Economics and Administrative Sciences, Kahramanmaras Sütçü Imam University, Kahramanmaras/TURKEY)

  • Peker Osman

    (Faculty of Nazilli Economics and Administrative Sciences, Adnan Menderes University, Aydin/TURKEY)

  • Kaplan Muhittin

    (Faculty of Economics and Administrative Sciences, Niğde University, Niğde/TURKEY)

The determinants of economic growth have been a much debated theoretical issue in the literature, especially after the endogenous growth theory of the late 1980s. This new theory highlights the importance of economic policies that lead to an increasing rate of return. In particular, it is argued that human capital, trade liberalization and financial development may play very important roles in the determination of economic growth. This paper tries to empirically estimate the joint impacts of trade liberalization and financial development on economic growth for the period 1960-2004. Instead of using common proxies for the issue, principal components analysis is employed to develop better measures (indexes) for trade liberalization, financial development and the joint effects of both. The empirical results obtained from the Johansen co-integration procedure show that trade liberalization, financial development and the joint impacts of both positively contributed to economic growth in Turkey for the period 1963-2005.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.degruyter.com/view/j/jeb.2008.3.issue-2/v10033-008-0012-x/v10033-008-0012-x.xml?format=INT
Download Restriction: no

Article provided by De Gruyter Open in its journal South East European Journal of Economics and Business.

Volume (Year): 3 (2008)
Issue (Month): 2 (November)
Pages: 25-38

as
in new window

Handle: RePEc:vrs:seejeb:v:3:y:2008:i:2:p:25-38:n:3
Contact details of provider: Web page: http://www.degruyteropen.com

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
  2. Gelb, Alan H., 1989. "Financial policies, growth, and efficiency," Policy Research Working Paper Series 202, The World Bank.
  3. Fatih Özatay & Güven Sak, 2002. "Financial Liberalization in Turkey: Why Was the Impact on Growth Limited?," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 38(5), pages 6-22, October.
  4. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
  5. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  6. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
  7. Guncavdi Oner & Kucukcifci Suat, 2005. "Financial Reforms and the Decomposition of Economic Growth: An Investigation of the Changing Role of the Financial Sector in Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 3(1), pages 61-84, April.
  8. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
  9. Blackburn, Keith & Hung, Victor T Y, 1998. "A Theory of Growth, Financial Development and Trade," Economica, London School of Economics and Political Science, vol. 65(257), pages 107-124, February.
  10. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  11. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
  12. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
  13. Deren Unalmis, 2002. "The Causality Between Financial Development and Economic Growth : The Case of Turkey," Working Papers 0203, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  15. King, Robert G.*Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  16. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  17. David Greenaway & David Sapsford, "undated". "What does Liberalisation do for Exports and Growth?," Working Papers ec4/94, Department of Economics, University of Lancaster.
  18. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
  19. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  20. M. Scott Taylor, 1994. ""Once-off" and Continuing Gains from Trade," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 589-601.
  21. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  22. Lewis, Jeffrey D., 1992. "Financial repression and liberalization in a general equilibrium model with financial markets," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 135-166, April.
  23. Insang Hwang, 1998. "Long-run determinant of Korean economic growth: empirical evidence from manufacturing," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 391-405.
  24. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  25. Odedokun, Matthew O., 1999. "How the Size of the Monetary Sector Affects Economic Growth: Econometric Evidence from Industrial and Developing Countries," Journal of Policy Modeling, Elsevier, vol. 21(2), pages 213-241, March.
  26. Liang, Qi & Teng, Jian-Zhou, 2006. "Financial development and economic growth: Evidence from China," China Economic Review, Elsevier, vol. 17(4), pages 395-411.
  27. Pablo Emilio Guidotti & Jose De Gregorio, 1992. "Financial Development and Economic Growth," IMF Working Papers 92/101, International Monetary Fund.
  28. Yeldan, A. Erinc, 1997. "Financial liberalization and fiscal repression in Turkey: Policy analysis in a CGE model with financial markets," Journal of Policy Modeling, Elsevier, vol. 19(1), pages 79-117, February.
  29. Fosu, Augustin Kwasi, 1990. "Export composition and the impact of exports on economic growth of developing economies," Economics Letters, Elsevier, vol. 34(1), pages 67-71, September.
  30. Subrata Ghatak & Chris Milner & Utku Utkulu, 1997. "Exports, export composition and growth : cointegration and causality evidence for Malaysia," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 213-223.
  31. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  32. Andy Kwan & Yangru Wu & Junxi Zhang, 1998. "An exogeneity analysis of financial deepening and economic growth: evidence from Hong Kong, South Korea and Taiwan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(3), pages 339-354.
  33. Hansson, Pontus & Jonung, Lars, 1997. "Finance and economic growth: the case of Sweden 1834-1991," Research in Economics, Elsevier, vol. 51(3), pages 275-301, September.
  34. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  35. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
  36. Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
  37. Krueger, Anne O. & Tuncer, Baran, 1982. "Growth of factor productivity in Turkish manufacturing industries," Journal of Development Economics, Elsevier, vol. 11(3), pages 307-325, December.
  38. Utku Utkulu & Durmus Özdemir, 2005. "Does Trade Liberalization Cause a Long Run Economic Growth in Turkey," Economic Change and Restructuring, Springer, vol. 37(3), pages 245-266, 09.
  39. Sebastian Edwards, 1987. "Financial Deregulation and Segmented Capital Markets: The Case of Korea," UCLA Economics Working Papers 432, UCLA Department of Economics.
  40. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages 4-21, 02.
  41. Subrata Ghatak & Stephen Price, 1997. "Export composition and economic growth: Cointegration and causality evidence for India," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 538-553, September.
  42. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1997. "Corporate governance, competition policy and industrial policy," ULB Institutional Repository 2013/9613, ULB -- Universite Libre de Bruxelles.
  43. Jalal Siddiki, 2002. "Trade and Financial Liberalisation and Endogenous Growth in Bangladesh," International Economic Journal, Taylor & Francis Journals, vol. 16(3), pages 23-37.
  44. Panicos O. Demetriades & Khaled A.Hussein, 1995. "Does Financial Development Cause Economic Growth? Time-Series Evidence from 16 Countries," Keele Department of Economics Discussion Papers (1995-2001) 95/13, Department of Economics, Keele University.
  45. Fry, Maxwell J, 1978. "Money and Capital or Financial Deepening in Economic Development?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 464-475, November.
  46. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers 646, Yale - Economic Growth Center.
  47. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-799, May.
  48. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
  49. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  50. Raymond Batina, 1998. "On the Long Run Effects of Public Capital and Disaggregated Public Capital on Aggregate Output," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 263-281, July.
  51. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  52. Dhaneshwar Ghura, 1997. "Private Investment and Endogenous Growth; Evidence From Cameroon," IMF Working Papers 97/165, International Monetary Fund.
  53. Togan, Sübidey, 1997. "Opening up the Turkish Economy in the Context of the Customs Union with EU," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 157-179.
  54. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Economic implications for Turkey of a Customs Union with the European Union," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404 World Scientific Publishing Co. Pte. Ltd..
  55. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  56. Anthony Thirlwall, 2000. "Trade Agreements, Trade Liberalization and Economic Growth: A Selective Survey," African Development Review, African Development Bank, vol. 12(2), pages 129-160.
  57. A. Galetovic, 1996. "Finance and growth: a synthesis and interpretation of the evidence," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 59-82.
  58. Sylviane GUILLAUMONT JEANNENEY & PING HUA & ZHICHENG LIANG, 2006. "Financial Development, Economic Efficiency, And Productivity Growth: Evidence From China," The Developing Economies, Institute of Developing Economies, vol. 44(1), pages 27-52.
  59. Paul Auerbach & Jalal Uddin Siddiki, 2004. "Financial Liberalisation and Economic Development: An Assessment," Journal of Economic Surveys, Wiley Blackwell, vol. 18, pages 231-265, 07.
  60. Lau, Sau-Him Paul & Sin, Chor-Yiu, 1997. "Public Infrastructure and Economic Growth: Time-Series Properties and Evidence," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 125-135, June.
  61. Wojciech W. Charemza & Derek F. Deadman, 1997. "New Directions In Econometric Practice, Second Edition," Books, Edward Elgar Publishing, number 1139.
  62. Aghion, Philippe & Howitt, Peter, 1996. "Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
  63. Ghatak, Subrata & Milner, Chris & Utkulu, Utku, 1995. "Trade Liberalisation and Endogenous Growth: Some Evidence for Turkey," Economic Change and Restructuring, Springer, vol. 28(2-3), pages 147-167.
  64. Lamin Y Leigh, 1996. "Financial Development and Economic Growth; An Economic Analysis for Singapore," IMF Working Papers 96/15, International Monetary Fund.
  65. A. Galetovic, 1996. "Finance and growth: a synthesis and interpretation of the evidence," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 59-82.
  66. Serletis, Apostolos, 1994. "Testing the long-run implications of the neoclassical growth model for Canada," Journal of Macroeconomics, Elsevier, vol. 16(2), pages 329-346.
  67. Cellini, Roberto, 1997. "Implications of Solow's Growth Model in the Presence of a Stochastic Steady State," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 135-153, January.
  68. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-678, November.
  69. Fry, Maxwell J., 1980. "Money, interest, inflation and growth in Turkey," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 535-545, October.
  70. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
  71. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:vrs:seejeb:v:3:y:2008:i:2:p:25-38:n:3. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.