Financial Openness, Trade Openness and Economic Growth: An Empirical Application on Turkey
Abstract
The existing relationship between financial openness and economic growth is significant for a healthy analysis of country economies. In this study, it is aimed to investigate the relationship between Turkey's financial openness and economic growth by using annual data from 1985 to 2018. In the study, Turkey's data from 1985 to 2018 were used. The variables used are economic growth (GDP), financial openness (FA) and trade openness (DA). All variables are handled in terms of current ($). Here, the natural logarithm of GDP, FA and DA variables is taken and included in the model. In the study, firstly, the stationarities of the variables were determined by Carrion-i-Silvestre et al. (2009) analyzed with unit root tests. Maki (2012) cointegration test, which allows multiple structural breaks, was used after it was determined that the variables were stationary at the I(1) level. Causality analysis between variables was tested with Hacker & Hatemi (2006) bootstrap causality test. When the structural break dates are examined, it has been determined that the economic crises in 1994, 1998 and 2001 in Turkey and the global economic crises that started in 2007 and intensified in 2008 caused structural breaks by deeply affecting the Turkish economy. By determining the cointegration relationship between the variables, it was found that they would act together in the long run. In addition, a bidirectional causality relationship was found between financial openness and economic growth. In the light of these findings, it was concluded that policy makers should focus more on financial openness when they develop policies for economic growth.
Keywords
References
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