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

Listed author(s):
  • 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)

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.

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File URL: http://www.queensjdiexec.org/publications/qed_dp_288.pdf
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Paper provided by JDI Executive Programs in its series Development Discussion Papers with number 2016-06.

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Length: 27 pages
Date of creation: Jun 2016
Handle: RePEc:qed:dpaper:288
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  1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
  2. 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..
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Robert Bain, 2009. "Error and optimism bias in toll road traffic forecasts," Transportation, Springer, vol. 36(5), pages 469-482, September.
  8. Timothy C. Irwin, 2007. "Government Guarantees : Allocating and Valuing Risk in Privately Financed Infrastructure Projects," World Bank Publications, The World Bank, number 6638.
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