The Finance-Growth Nexus for Turkey over the Period 1960-2020: A Markov-Switching Regime Shift Model
The Finance-Growth Nexus for Turkey over the Period 1960-2020: A Markov-Switching Regime Shift Model

Author(s): Ahmet Gökçe Akpolat, Hasan Tansoy
Subject(s): National Economy, Economic history, Economic development, Post-War period (1950 - 1989), Transformation Period (1990 - 2010), Present Times (2010 - today)
Published by: Özgür Yayın Dağıtım Ltd. Şti.
Keywords: GDP; Turkey; Finance-Growth Nexus; 1960; 2020;
Summary/Abstract: This paper addresses the finance-growth relationship employing Markov-switching regime shift model for Turkey over the period 1960-2020. Growth rate of real GDP is employed as a measure of economic growth while the change in ratio of broad money to GDP and the change in the ratio of domestic credits to GDP are used as two indicators of financial development. Findings show that a positive change in the ratio of broad money to GDP reduces the economic growth rate both before and after the global crisis. On the other hand, a positive change in the ratio of domestic credits to GDP increases the rate of economic growth in both of these two periods. Moreover, an increase in the ratio of broad money to GDP reduces the economic growth rate less before the global crisis than after the global crisis. Similarly, an increase in the ratio of domestic credits to GDP increases the economic growth rate more before the global crisis than after the global crisis. As a general assessment, it is seen that the positive effect of finance on the Turkish economy has weakened after the global crisis. In addition, it is considered that an increase in the money supply more than the economic growth rate can decrease the potential growth rate of the country.

• Details
• Contents