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

  • 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)

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    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.

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    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

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    Handle: RePEc:vrs:seejeb:v:3:y:2008:i:2:p:25-38:n:3
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