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Long Run Profit Maximization in the Turkish Manufacturing Sector

  • Avni Onder Hanedar


    (Department of Economics, Faculty of Business, Dokuz Eylül University)

  • Elmas Yaldiz


    (Department of Economics, Izmir University of Economics)

  • Ozgul Bilici


    (Department of Economics, Izmir University of Economics)

  • Onur Akkaya

The purpose of this research is to investigate whether the long-run relationship implied by profit maximization is valid for the Turkish manufacturing industry for the period of 1950-2001. During this period, the Turkish economy has experienced important policy changes, for example the implementation of liberalization policies after the 1980s. Thus, the possible effects of economic policy implementations over the profit maximization in the Turkish manufacturing sector will also be studied by using advanced time series techniques such as the Zivot and Andrews (1992) unit root test and the Gregory and Hansen (1996) co-integration test. The results of the study show that rationalization mechanism does not appear to work in Turkey. Because most of the previous studies on this issue are concentrated in developed countries and also, there has been little research into the Turkish manufacturing sector, the contribution of this study is important.

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Paper provided by Dokuz Eylül University, Faculty of Business, Department of Economics in its series Discussion Paper Series with number 06/02.

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Length: 13 pages
Date of creation: 30 Nov 2006
Date of revision: 30 Nov 2006
Handle: RePEc:deu:dpaper:0602
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  1. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  2. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  4. Pål Boug, 1999. "The Demand for Labour and the Lucas Critique. Evidence from Norwegian Manufacturing," Discussion Papers 256, Statistics Norway, Research Department.
  5. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  6. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
  7. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Universite de Montreal, Departement de sciences economiques.
  8. Jenkinson, T J, 1986. "Testing Neo-Classical Theories of Labour Demand: An Application of Cointegration Techniques," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 241-51, August.
  9. R. MacDonald & P.D. Murphy, 1992. "Employment in Manufacturing: A Long-run Relationship and Short-run Dynamics," Journal of Economic Studies, Emerald Group Publishing, vol. 19(5), pages 3-18, October.
  10. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
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