Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey
Balance of payments constrained growth model considers that if a country has a chronic external deficit, economic growth can be constrained. Initial model extended by taking into account the effects of capital flows, external debt sustainability, interest payments, budget deficit or public debt, sim...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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SAGE Publishing
2020-06-01
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| Series: | SAGE Open |
| Online Access: | https://doi.org/10.1177/2158244020919493 |
| _version_ | 1819016115184992256 |
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| author | Irfan Civcir M. Emir Yücel |
| author_facet | Irfan Civcir M. Emir Yücel |
| author_sort | Irfan Civcir |
| collection | DOAJ |
| description | Balance of payments constrained growth model considers that if a country has a chronic external deficit, economic growth can be constrained. Initial model extended by taking into account the effects of capital flows, external debt sustainability, interest payments, budget deficit or public debt, simultaneous effect of internal and external imbalance, and the role of relative prices. We further incorporate Turkey’s high intensity of imports in the aggregate demand components and estimated the model with system estimator. The new version of the model improves significantly explaining the growth in Turkey. Our results reveal that economic growth in Turkey constrained by internal and external imbalances and relative prices play a significant role. Policies aimed at changing the structure of the imports and exports are the most effective for achieving higher growth. It is also shown that economic growth in Turkey highly depends on external demand when the strong depreciation of the domestic currency also acts as a stimulus to growth. |
| first_indexed | 2024-12-21T02:42:30Z |
| format | Article |
| id | doaj.art-cba0a058db2445f9a04c2197ddea3d84 |
| institution | Directory Open Access Journal |
| issn | 2158-2440 |
| language | English |
| last_indexed | 2024-12-21T02:42:30Z |
| publishDate | 2020-06-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | SAGE Open |
| spelling | doaj.art-cba0a058db2445f9a04c2197ddea3d842022-12-21T19:18:40ZengSAGE PublishingSAGE Open2158-24402020-06-011010.1177/2158244020919493Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From TurkeyIrfan Civcir0M. Emir Yücel1Ankara University, TurkeyBartin University, TurkeyBalance of payments constrained growth model considers that if a country has a chronic external deficit, economic growth can be constrained. Initial model extended by taking into account the effects of capital flows, external debt sustainability, interest payments, budget deficit or public debt, simultaneous effect of internal and external imbalance, and the role of relative prices. We further incorporate Turkey’s high intensity of imports in the aggregate demand components and estimated the model with system estimator. The new version of the model improves significantly explaining the growth in Turkey. Our results reveal that economic growth in Turkey constrained by internal and external imbalances and relative prices play a significant role. Policies aimed at changing the structure of the imports and exports are the most effective for achieving higher growth. It is also shown that economic growth in Turkey highly depends on external demand when the strong depreciation of the domestic currency also acts as a stimulus to growth.https://doi.org/10.1177/2158244020919493 |
| spellingShingle | Irfan Civcir M. Emir Yücel Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey SAGE Open |
| title | Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey |
| title_full | Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey |
| title_fullStr | Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey |
| title_full_unstemmed | Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey |
| title_short | Effects of Internal and External Imbalances and the Role of Relative Prices on Economic Growth: Evidence From Turkey |
| title_sort | effects of internal and external imbalances and the role of relative prices on economic growth evidence from turkey |
| url | https://doi.org/10.1177/2158244020919493 |
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