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The economic and financial stability in Turkey: a historical perspective


  • Yuksel Gormez

    (Central Bank of Turkey)

  • Serkan Yigit

    (Central Bank of Turkey)


Since gaining independence in 1923 until the 2000s when the Republic of Turkey applied for membership in the European Union, volatile trends were recorded in the country in terms of both economic growth and financial performance. In the early stages, lack of human capital and hard currency reserves prevented rapid economic growth and creation of welfare. The priority was given to institutional reforms in order to achieve sustainable growth under low inflation and financial stability. Heightened political unrest in Europe leading to WWII forced the Young Republic to rely on a “mixed” system of etatism for sustainable growth and financial stability. Private ownership and greater participation of private capital in economic activity were given additional incentives during the 1950s, whereas an import-substitution growth strategy was initiated quite successfully during the 1960s when the Turkish economy experienced the best growth performance during 80 years of its existence. The oil crisis of the 1970s took away all the resources and prevented the emergence of strong private banks. The accumulated capital was wiped out by the balance of payment crises. The second half of the 1980s was the period when private banks began winning a market share. The 1990s, which may best be described as the “lost decade” in terms of banking and financial stability, ended with a huge financial crisis in 2001. After 2002, Turkish economy managed to achieve a very high level of growth that came with low and decreasing rate of inflation. The Republic of Turkey is now facing the challenging task of increasing domestic savings to support sustainable growth under low and stable inflation and managing its way through the complications of global financial crises that still clouds the air and threatens the economic and financial stability all around the world.

Suggested Citation

  • Yuksel Gormez & Serkan Yigit, 2009. "The economic and financial stability in Turkey: a historical perspective," SEEMHN papers 12, National Bank of Serbia.
  • Handle: RePEc:nsb:seemhn:12
    Note: The paper was presented at the Fourth Annual SEEMHN Conference hosted by the National Bank of Serbia, 27 March 2009 in Belgrade.

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    References listed on IDEAS

    1. Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
    2. Garry J. Schinasi, 2003. "Responsibility of Central Banks for Stability in Financial Markets," IMF Working Papers 03/121, International Monetary Fund.
    3. Crockett, A, 1997. "The Theory and Practice of Financial Stability," Princeton Essays in International Economics 203, International Economics Section, Departement of Economics Princeton University,.
    4. Garry J. Schinasi, 2004. "Defining Financial Stability," IMF Working Papers 04/187, International Monetary Fund.
    5. John Chant & Alexandra Lai & Mark Illing & Fred Daniel, 2003. "Essays on Financial Stability," Technical Reports 95, Bank of Canada.
    6. Yuksel Gormez, 2008. "Banking in Turkey: History and Evolution," Working Papers 83, Bank of Greece.
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    More about this item


    Banking; Financial Stability; Economic Growth.;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity


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