IDEAS home Printed from https://ideas.repec.org/p/tek/wpaper/2009-2.html
   My bibliography  Save this paper

Capital flows and economic growth across spectral frequencies: Evidence from Turkey

Author

Listed:
  • Nuri Yildirim

    (Yildiz Technical University)

  • Huseyin Tastan

    (Yildiz Technical University)

Abstract

In this paper we study the interactions and feedbacks between three categories of net capital flows and growth in the Turkish economy for the 1992:01-2009:01 period using frequency domain techniques. Our main spectral analysis tool is a new version of the causality test of Geweke (1982) and Hosoya (1991) in the frequency domain developed by Breitung and Candelon (2006). Besides, we make use of other tools of spectrum analysis such as cospectrum, squared coherence, phase and gain spectrums to decompose total covariance between capital flows and growth across main frequency bands and capture lead/lag interactions between them. Some of our empirical findings are as follows: Variance decompositions over frequency bands reveal that variations in individual capital flow categories are concentrated over high (seasonal) frequencies. We found no feedback from short-term and long-term ‘other’ investments to growth in these frequencies. However, there are highly significant feedbacks from growth to short-term and long-term capital inflows over business cycle and seasonal frequencies. Spectral variance decompositions reveal that, in general, percentage of variation in capital flows due to economic growth is much higher than the percentage of variation in growth due to capital flows.

Suggested Citation

  • Nuri Yildirim & Huseyin Tastan, 2009. "Capital flows and economic growth across spectral frequencies: Evidence from Turkey," Working Papers 2009/2, Turkish Economic Association.
  • Handle: RePEc:tek:wpaper:2009/2
    as

    Download full text from publisher

    File URL: http://www.tek.org.tr/dosyalar/yildirim-tastan-09.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peter B. Kenen, 2007. "The Benefits and Risks of Financial Globalization," Cato Journal, Cato Journal, Cato Institute, vol. 27(2), pages 179-183, Spring/Su.
    2. Chanda, Areendam, 2005. "The influence of capital controls on long run growth: Where and how much?," Journal of Development Economics, Elsevier, vol. 77(2), pages 441-466, August.
    3. Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
    4. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2001. "Emerging equity markets and economic development," Journal of Development Economics, Elsevier, vol. 66(2), pages 465-504, December.
    5. Sebastian Edwards, 2001. "Capital Mobility and Economic Performance: Are Emerging Economies Different?," NBER Working Papers 8076, National Bureau of Economic Research, Inc.
    6. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2005. "Does financial liberalization spur growth?," Journal of Financial Economics, Elsevier, vol. 77(1), pages 3-55, July.
    7. Michael W. Klein & Giovanni Olivei, 1999. "Capital Account Liberalization, Financial Depth and Economic Growth," NBER Working Papers 7384, National Bureau of Economic Research, Inc.
    8. Hutchison, Michael M. & Noy, Ilan, 2006. "Sudden stops and the Mexican wave: Currency crises, capital flow reversals and output loss in emerging markets," Journal of Development Economics, Elsevier, vol. 79(1), pages 225-248, February.
    9. Hakan Berument & N. Nergiz Dincer, 2004. "Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? : The Turkish Experience," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(4), pages 20-32, July.
    10. Ben Gamra, Saoussen, 2009. "Does financial liberalization matter for emerging East Asian economies growth? Some new evidence," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 392-403, June.
    11. Pierre-Olivier Gourinchas & Olivier Jeanne, 2006. "The Elusive Gains from International Financial Integration," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 715-741.
    12. C. Emre Alper, 2002. "Business Cycles, Excess Volatility, and Capital Flows: Evidence from Mexico and Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 38(4), pages 25-58, August.
    13. Reisen, Helmut & Soto, Marcelo, 2001. "Which Types of Capital Inflows Foster Developing-Country Growth?," International Finance, Wiley Blackwell, vol. 4(1), pages 1-14, Spring.
    14. Mishkin, Frederic S., 2009. "Globalization and financial development," Journal of Development Economics, Elsevier, vol. 89(2), pages 164-169, July.
    15. Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, March.
    16. Baharumshah, Ahmad Zubaidi & Thanoon, Marwan Abdul-Malik, 2006. "Foreign capital flows and economic growth in East Asian countries," China Economic Review, Elsevier, vol. 17(1), pages 70-83.
    17. Joyce, Joseph P. & Nabar, Malhar, 2009. "Sudden stops, banking crises and investment collapses in emerging markets," Journal of Development Economics, Elsevier, vol. 90(2), pages 314-322, November.
    18. Mariano Roberto S & Gultekin Bulent N & Ozmucur Suleyman & Shabbir Tayyeb & Alper C. Emre, 2004. "Prediction of Currency Crises: Case of Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 1-21, August.
    19. Carlos Arteta & Barry Eichengreen & Charles Wyplosz, 2001. "When Does Capital Account Liberalization Help More than It Hurts?," NBER Working Papers 8414, National Bureau of Economic Research, Inc.
    20. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
    21. Huseyin Tastan & Nuri Yildirim, 2008. "Business cycle asymmetries in Turkey: an application of Markov-switching autoregressions," International Economic Journal, Taylor & Francis Journals, vol. 22(3), pages 315-333.
    22. Barry P. Bosworth & Susan M. Collins, 1999. "Capital Flows to Developing Economies: Implications for Saving and Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 143-180.
    23. Hali J. Edison & Michael W. Klein & Luca Antonio Ricci & Torsten Sløk, 2004. "Capital Account Liberalization and Economic Performance: Survey and Synthesis," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-2.
    24. Guillermo A. Calvo, 1998. "Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops," Journal of Applied Economics, Universidad del CEMA, vol. 1, pages 35-54, November.
    25. Stiglitz, Joseph E., 1999. "Lessons From East Asia," Journal of Policy Modeling, Elsevier, vol. 21(3), pages 311-330, May.
    26. Yao, Feng & Hosoya, Yuzo, 2000. "Inference on one-way effect and evidence in Japanese macroeconomic data," Journal of Econometrics, Elsevier, vol. 98(2), pages 225-255, October.
    27. Akyuz, Yilmaz & Boratav, Korkut, 2003. "The Making of the Turkish Financial Crisis," World Development, Elsevier, vol. 31(9), pages 1549-1566, September.
    28. Soto, Marcelo, 2003. "Taxing capital flows: an empirical comparative analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 203-221, October.
    29. Geweke, John, 1984. "Inference and causality in economic time series models," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 19, pages 1101-1144 Elsevier.
    30. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
    31. Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
    32. Clive, W.J. & Lin, Jin-Lung, 1995. "Causality in the Long Run," Econometric Theory, Cambridge University Press, vol. 11(03), pages 530-536, June.
    33. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
    34. repec:cup:apsrev:v:91:y:1997:i:03:p:531-551_21 is not listed on IDEAS
    35. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January.
    36. Ahmet Çimenoglu & Nurhan Yentürk, 2005. "Effects of International Capital Inflows on the Turkish Economy," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 90-109, January.
    37. Honig, Adam, 2008. "Addressing causality in the effect of capital account liberalization on growth," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1602-1616, December.
    38. Breitung, Jorg & Candelon, Bertrand, 2006. "Testing for short- and long-run causality: A frequency-domain approach," Journal of Econometrics, Elsevier, vol. 132(2), pages 363-378, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yusuf Ekrem Akbas & Mehmet Senturk & Canan Sancar, 2013. "Testing for Causality between the Foreign Direct Investment, Current Account Deficit, GDP and Total Credit: Evidence from G7," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 791-812, December.
    2. International Monetary Fund, 2016. "Turkey; Selected Issue," IMF Staff Country Reports 16/105, International Monetary Fund.
    3. Nikola Gradojević & Eldin Dobardžić, 2013. "Causality between Regional Stock Markets: A Frequency Domain Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 633-647, September.
    4. Halil Simdi & Hakan Tunahan, 2016. "The Power Of Trade Costs Over International Trade: Causality Analysis In Frequency Domain For Turkey," Journal Articles, Center For Economic Analyses, pages 41-50, December.

    More about this item

    Keywords

    Capital flows; causality in frequency domain; Geweke’s measure of feedback; Turkey;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tek:wpaper:2009/2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ercan Uygur). General contact details of provider: http://edirc.repec.org/data/tekkkea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.