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Finance, Instability, Debt and Growth: The Turkish Case, 1980-2010

Author

Listed:
  • Mustafa İsmihan

    (Atilim University)

  • Burcu Dinçergök

    (Atilim University)

  • Seyit Mümin Cilasun

    (Atilim University)

Abstract

Empirical results on the link between financial development and economic growth is mixed in Turkey. However, existing studies did not take into account the fact that Turkey has experienced endemic political and economic instabilities over extended periods. As a consequence of such instabilities, Turkish economy has shown frequent growth accelerations and collapses. Moreover, Turkish banking sector preferred to finance public borrowing rather than lending to the private sector due to the prevalence of high real interest rates on government bonds particularly during the 1990s. This study, therefore, aims to analyze the role of overall macroeconomic instability and public borrowing on finance-growth nexus in Turkey by using time series econometric techniques over the 1980-2010 period. After taking into account the effects of overall instability and public borrowing, we found a significant finance-growth link.

Suggested Citation

  • Mustafa İsmihan & Burcu Dinçergök & Seyit Mümin Cilasun, 2013. "Finance, Instability, Debt and Growth: The Turkish Case, 1980-2010," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 271, Ekonomik Yaklasim Association.
  • Handle: RePEc:eyd:cp2013:271
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    File URL: http://www.ekonomikyaklasim.org/eyc2013/?download=Paper%20271.pdf
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    References listed on IDEAS

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    1. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
    2. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    3. Hauner, David, 2009. "Public debt and financial development," Journal of Development Economics, Elsevier, vol. 88(1), pages 171-183, January.
    4. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    5. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    6. Levine, Ross & Zervos, Sara, 1996. "Stock Market Development and Long-Run Growth," World Bank Economic Review, World Bank Group, vol. 10(2), pages 323-339, May.
    7. Ismihan, Mustafa & Ozkan, F. Gulcin, 2012. "Public debt and financial development: A theoretical exploration," Economics Letters, Elsevier, vol. 115(3), pages 348-351.
    8. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    9. Christer Ljungwall & Junjie Li, 2007. "Financial Sector Development, FDI and Economic Growth in China," Finance Working Papers 22026, East Asian Bureau of Economic Research.
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    1. repec:rfe:zbefri:v:34:y:2016:i:2:p:529-554 is not listed on IDEAS

    More about this item

    Keywords

    Financial Development; Public Debt; Macroeconomic Instability; Growth; Turkey;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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