Analysis of economic growth of Turkey: past and pre 2001 financial crisis

Year 2014, Volume: 1 Issue: 1, 26 - 37, 01.03.2014

Perihan Hahzal Er Zeynep Karacar Rahime Hulya Ozturk

Abstract

It has been seen that growth performance of Turkish economy has decreased in the last twenty-five years. Especially in the 1990s instability in macroeconomy increased with the impact of the developments in the financial market, crisis that began in financial market in 1994 and 2001 has led to the contraction of the real economy severely. However, 2001 financial crisis, resulting in unexpected economic contraction, is a milestone. Considering the indicators of 2001, the size of the contraction can be well understood, it is observed that concrete steps are taken towards the prevention and overcoming of the crisis deepening. The continuity ensured in the fiscal discipline, implementation of structural reforms and the tight monetary policy focused on price stability have had a positive impact on inflationary expectations of economic agents. Economy grew by an average 3.1% during the 19902001 period before the 2001 financial crisis; after then during the 2002-2006 period, economy has entered a rapid growth process and has grown average annual rate of 7.2%, and 3.3 % in the 2007-2012 period. In the 2002-2012 period private sector consumption and investment spending constituted the most important source of demand-side growth, in this period the rise of current account deficit due to increasing economic growth, failure to carry out a growth based on employment and increased productivity of the industrial sector which is provided with cheap labor are the drawback of this period. After 2007, the major cause of the decline in growth is global crisis. In this study, developments in growth as a result of the economic program implemented after the financial crisis of 2001 will be discussed. In this respect, in order to analyze the relationship between economic growth, unemployment rate, interest rate and investment by using variables of the 1990-2012 period, Chow test will be applied. In the analysis, the reason for using Chow test is whether there is any difference in economic terms between the policies implemented for economic growth in the 1990-2001 period and policies implemented in the 20022012 period after the financial crisis of 2001 as a result of the structural transformation. 1. INTRODUCTION

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