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Macroeconomic instability, capital accumulation and growth: The case of Turkey 1963-1999

  • Mustafa Ismihan

    (Department of Economics, Atilim University)

  • Kivilcim Metin-Özcan

    (Department of Economics, Bilkent University)

  • Aysit Tansel

    ()

    (Department of Economics, METU)

This study investigates the empirical relationships between macroeconomic instability, capital accumulation and growth in Turkey over the period 1963-1999. We use recent time series econometric techniques, such as cointegration and impulse response analysis, to analyze empirical relationships between the variables of interest. The results of this paper suggest that the chronic and increasing macroeconomic instability of the Turkish economy has seriously affected her capital formation and hence her growth. Furthermore, chronic macroeconomic instability seems to become a serious impediment to the public investment, especially, its infrastructure component, and shattered or, even reversed the complementarity between public and private investment in the long-run. Therefore, Turkish experience has shown that macroeconomic instability not only deteriorates economic growth but it could also reverse the complementarity between public and private investment in the long-run.

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File URL: http://www.erc.metu.edu.tr/menu/series02/0204.pdf
File Function: First version, 2002
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Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 0204.

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Length: pages
Date of creation: Apr 2002
Date of revision: Apr 2002
Handle: RePEc:met:wpaper:0204
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