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Speculation-led growth and fragility in Turkey: Does EU make a difference or "can it happen again"?

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  • Özlem Onaran

    () (Department of Economics, Vienna University of Economics & B.A.)

Abstract

The aim of this paper is to analyze the pattern of speculation-led growth in Turkey. It is dependent on international capital flows, whose continuity becomes more and more critical given the current account deficit, which is estimated to reach 6.1% as a ratio to GDP at the end of 2005. The paper assesses the sustainability of this speculation-led growth in the context of EU enlargement and compares the current state of fragility with former crises in Turkey as well as in East Asia and Latin America. Following a severe financial crisis in 2001, Turkey has entered a new phase of fragile growth led by boom-euphoric expectations. The paper aims at explaining this new phase and the evolution of the risk perceptions of both the creditors as well as the debtors in this "speculation game" based on the post-Keynesian/Minskyan concepts of endogenous expectations and financial fragility.

Suggested Citation

  • Özlem Onaran, 2006. "Speculation-led growth and fragility in Turkey: Does EU make a difference or "can it happen again"?," Department of Economics Working Papers wuwp093, Vienna University of Economics and Business, Department of Economics.
  • Handle: RePEc:wiw:wiwwuw:wuwp093
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    References listed on IDEAS

    as
    1. Özlem Onaran & Engelbert Stockhammer, 2005. "Two Different Export-Oriented Growth Strategies: Accumulation and Distribution in Turkey and South Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 65-89, January.
    2. Ozlem Onaran & Nurhan Yenturk, 2001. "Do Low Wages Stimulate Investment? An analysis of the relationship between distribution and investment in Turkish private manufacturing industry," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(4), pages 359-374.
    3. Philip Arestis, 2002. "Financial crisis in Southeast Asia: dispelling illusion the Minskyan way," Cambridge Journal of Economics, Oxford University Press, vol. 26(2), pages 237-260, March.
    4. Nurhan YENTÜRK, 1999. "SHORT-TERM CAPITAL INFLOWS AND THEIR IMPACT ON MACROECONOMIC STRUCTURE: TURKEY IN THE 1990s," The Developing Economies, Institute of Developing Economies, vol. 37(1), pages 89-113, March.
    5. Onaran, Özlem & Stockhammer, Engelbert, 2006. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis," Department of Economics Working Paper Series 1450, WU Vienna University of Economics and Business.
    6. James R. Crotty, 1993. "Rethinking Marxian Investment Theory: Keynes-Minsky Instability, Competitive Regime Shifts and Coerced Investment," Review of Radical Political Economics, Union for Radical Political Economics, vol. 25(1), pages 1-26, March.
    7. Morris Goldstein, 2005. "What Might the Next Emerging-Market Financial Crisis Look Like?," Working Paper Series WP05-7, Peterson Institute for International Economics.
    8. Erin Yeldan & Kivilcim Metin-…zcan & Ebru Voyvoda, 1999. "Dynamics of Macroeconomic Adjustment in a Globalized Developing Economy : Growth, Accumulation and Distribution, Turkey 1969-1998," Working Papers 9905, Department of Economics, Bilkent University.
    9. Cem Baslevent & Ozlem Onaran, 2003. "Are Married Women in Turkey More Likely to Become Added or Discouraged Workers?," LABOUR, CEIS, vol. 17(3), pages 439-458, September.
    10. Jan A. Kregel, 1998. "Yes, 'It' Did Happen Again: A Minsky Crisis Happened in Asia," Economics Working Paper Archive wp_234, Levy Economics Institute.
    11. Duncan K. Foley, 2003. "Financial fragility in developing economies," Chapters,in: Development Economics and Structuralist Macroeconomics, chapter 8 Edward Elgar Publishing.
    12. Ozlem Onaran, 2002. "Measuring wage flexibility: the case of Turkey before and after structural adjustment," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 767-781.
    13. Carmen F. Castejón & Julia Wörz, 2006. "Good or Bad? The Influence of FDI on Output Growth: An industry-level analysis," wiiw Working Papers 38, The Vienna Institute for International Economic Studies, wiiw.
    14. Burc Ulengin & Nurhan Yenturk, 2001. "Impacts of capital inflows on aggregate spending categories: the case of Turkey," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1321-1328.
    15. Baslevent, Cem & Onaran, Ozlem, 2004. "The Effect of Export-Oriented Growth on Female Labor Market Outcomes in Turkey," World Development, Elsevier, vol. 32(8), pages 1375-1393, August.
    16. Joze Mencinger, 2003. "Does Foreign Direct Investment Always Enhance Economic Growth?," Kyklos, Wiley Blackwell, vol. 56(4), pages 491-508, November.
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    Cited by:

    1. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Society (PKES).
    2. Mihai Macovei, 2009. "Growth and economic crises in Turkey: leaving behind a turbulent past?," European Economy - Economic Papers 2008 - 2015 386, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Jan Toporowski & Giovanni Cozzi, 2006. "The Balance Sheet Approach to Financial Crises in Emerging Markets," Economics Working Paper Archive wp_485, Levy Economics Institute.
    4. Alpaslan AKÇORAOĞLU & Erkan AĞASLAN, 2009. "Current Account Deficits, Sustainability and Global Financial Crisis: Evidence from Turkey, 1987-2008," Ekonomik Yaklasim, Ekonomik Yaklasim Association, vol. 20(72), pages 1-20.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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