The private sector's response to financial liberalization in Turkey : 1980-82
Financial liberalization was carried out during a period when the nonfinancial corporate sector was in financial distress due to reduced profitability. The consequent emergence of substantial nonperforming loans in the banking sector, especially among smaller banks, created fierce competition for financial rates. Instead of forcing insolvent borrowers into bankruptcy, banks refinanced nonperforming loans as a way to prolong their own survival, and real credit in the private sector increased dramatically. An analysis of firm-level data reveals that nonfinancial corporations were subject to both an earnings shock and an interest rate shock. The Turkish experience suggests that financial liberalization may not produce desired results when it occurs in a period of major economic realignments that adversely affect the profitability of the corporate sector especiallywhen it is implemented without an adequate regulatory framework.
|Date of creation:||31 Jan 1989|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 1-24.
- Easterly, William R., 1989. "Fiscal adjustment and deficit financing during the debt crisis," Policy Research Working Paper Series 138, The World Bank.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Diamond, Douglas W & Dybvig, Philip H, 1983.
"Bank Runs, Deposit Insurance, and Liquidity,"
Journal of Political Economy,
University of Chicago Press, vol. 91(3), pages 401-19, June.
- Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:147. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.