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Determination of Socially Equitable Guarantees for PPPs: A Toll-Road Case from Turkey

Author

Listed:
  • Ilker Ersegun Kayhan

    () (Department of Banking and Finance,Eastern Mediterranean University, Gazimagusa, Mersin 10, Turkey)

  • Glenn P. Jenkins

    () (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

In toll-road projects there is exogenous demand risk. Thus, the government may be required to provide a minimum-traffic guarantee to induce potential private partners to participate. The government must offer the most appropriate level of guarantee while also justifying this controversial fiscal policy tool to society. This study demonstrates the use of financial modeling, risk analysis, and economic evaluation in a toll-road project in Turkey, contributing to the narrowing of a capacity gap in the field. One criterion is proposed to produce a socially equitable guarantee level. This case study exemplifies the policy implications discussed in the conclusions.

Suggested Citation

  • Ilker Ersegun Kayhan & Glenn P. Jenkins, 2016. "Determination of Socially Equitable Guarantees for PPPs: A Toll-Road Case from Turkey," Development Discussion Papers 2016-06, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:288
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    2. Jun Jaebum, 2010. "Appraisal of Combined Agreements in BOT Project Finance: Focused on Minimum Revenue Guarantee and Revenue Cap Agreements," International Journal of Strategic Property Management, De Gruyter Open, vol. 14(2), pages 139-155, June.
    3. Ahmet Can Ýnci, 2007. "Currency and yield Co-integration between a developed and an emerging Country: The Case of Turkey," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 21(1+2), pages 1-20.
    4. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
    5. Timothy C. Irwin, 2007. "Government Guarantees : Allocating and Valuing Risk in Privately Financed Infrastructure Projects," World Bank Publications, The World Bank, number 6638.
    6. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    7. Charles Cheah & Jicai Liu, 2006. "Valuing governmental support in infrastructure projects as real options using Monte Carlo simulation," Construction Management and Economics, Taylor & Francis Journals, vol. 24(5), pages 545-554.
    8. Carliss Baldwin & Donald Lessard & Scott Mason, 1983. "Budgetary Time Bombs: Controlling Government Loan Guarantees," Canadian Public Policy, University of Toronto Press, vol. 9(3), pages 338-346, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Toll-road project; financial modelling; economic evaluation; risk analysis; fiscal policy; Turkey;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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