Openness to Trade and Structural Changes in the Sources of Economic Growth and Labour Demand in Turkey

The Turkish economy has undergone drastic structural changes since 1980. While the effects of the Turkish adjustment programme have drawn considerable attention, a few studies have investigated its employment impacts. Unlike neoclassical expectation behind the structural adjustment programme, some studies for Turkey have showed that this policy change in 1980 caused a decline in employment. Results show that the Turkish industrialisation strategy cannot be regarded as export-led industrialisation strategy. Extra output created by exports has been very limited during the post-liberalisation period. However domestic final demand has continued to be the most dominant determinant of output growth. A Surprising result of the paper appears for the period of 1985-1990 when import substitution in final demand created output growth particularly in technology-intensive manufacturing and other manufacturing sectors. However import penetration in final and intermediate goods overwhelmingly important factors creating de-industrialisation in the period of 1990-1996. This paper, however, examines the sources of changes in employment. Despite neoclassical expectations, the reform period after 1982 witnessed large factor substitution against labour, even in the tradable goods sector. Additionally, labour demand also appears to response to output growth less in the post-liberalisation period than before.Structural changes, employment, input-output, trade reform, Turkey

Economic Growth under Embargoes in North Cyprus: An Input-Output Analysis

The North Cyprus economy has been under economic embargoes for many years, and has been struggling to eradicate the income difference with the south of the island with extremely limited facilities. Successive governments have accordingly developed distinctive responses to cope with these difficulties. The paper examines these features of the North Cyprus economy with a particular emphasis on its response to economic embargoes. The paper also examines how important economic embargoes would be (or have been) in the North Cypriot economy. For this purpose total economic growth is decomposed with respect to different components of demand. The results show that despite the presence of embargoes, external demand and the availability of import flows are detrimental factors for economic growth. Also domestic final demand is an equally important source of growth in the North Cyprus economy.

Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment

After the economic turmoil in 2001, the Turkish economy quickly recovered, and exhibited distinguished economic performance in successive years without any interruption. This success can be considered as a product of favourable international economic conditions, sound macroeconomic reforms, the beginning of the accession talks with the EU and political stability with a single party government. All these favourable conditions have allowed the Turkish economy to not have experienced any financial restraints in financing this distinguished economic performance. While increased expenditure, particularly in consumption and investment, together with high foreign demand for Turkish production, appear to have played an important role in these growth rates, the economy has begun to experience a large surge in imports and current account deficits in response to an increase in domestic expenditure. The purpose of this paper is to examine the role of macroeconomic components of aggregate expenditure in determining import demand in Turkey. Along with the empirical assessment, the paper also suggests a theoretical model of import demand, which is built upon a utility maximization of a country subject to budget constraints. The empirical model derived as a dynamic form of linear expenditure system was estimated with quarterly data from the Turkish economy for the period of 1987-2006. The results show that consumption and expenditure are two important demand components in determining imports in the long run whereas only the growth rates of consumption and investment are dominant factors in the short run. Public expenditure appeared to have no significant impact on import demand in Turkey.Aggregate Imports, Linear Expenditure System, Turkey, Error-Correction Model

Tradable and Nontradable Expenditure and Aggregate Demand for Import in an Emerging Market Economy

The Turkish economy has recently showed a remarkable performance in economic growth. This performance is particularly meaningful because it has occurred just after the worst economic crisis of the economy. Among other factors, the availability of high liquidity in international markets has played an important role in the easy access to foreign savings, and also increased domestic expenditure in the Turkish economy. This paper examines the importance of international liquidity usage in financing domestic aggregate expenditure. In this regard, we divide this expenditure into nontradable and tradable expenditure in terms of their income generation capability in different currencies. Nontradable expenditure generates income in local currency whereas tradable expenditure has the capability to generate income in foreign currency through trade. This division of the domestic expenditure components is particularly important if domestic expenditure is increasingly financed from capital inflow and if the nontradable component in domestic expenditure rises. Since nontradable expenditure creates income in local currency, and as its importance in Turkey has recently become high, the dependency of the economy on foreign exchange earning has also increased. This is shown by estimating the import demand function which includes the effects of disaggregated domestic expenditure. Empirically we found that nontradable expenditure is as crucial as tradable expenditure in generating import demand in the short run. This empirical finding makes us particularly sceptical regarding the positive effects of capital inflows which are closely related to the use of these inflows in tradable economic activities.

Economic Growth under Embargoes in North Cyprus: An Input-Output Analysis

The North Cyprus economy has been under economic embargoes for many years, and has been struggling to eradicate the income difference with the south of the island with extremely limited facilities. Successive governments have accordingly developed distinctive responses to cope with these difficulties. The paper examines these features of the North Cyprus economy with a particular emphasis on its response to economic embargoes. The paper also examines how important economic embargoes would be (or have been) in the North Cypriot economy. For this purpose total economic growth is decomposed with respect to different components of demand. The results show that despite the presence of embargoes, external demand and the availability of import flows are detrimental factors for economic growth. Also domestic final demand is an equally important source of growth in the North Cyprus economy

Economic Growth under Embargoes in North Cyprus: An Input-Output Analysis

The North Cyprus economy has been under economic embargoes for many years, and has been struggling to eradicate the income difference with the south of the island with extremely limited facilities. Successive governments have accordingly developed distinctive responses to cope with these difficulties. The paper examines these features of the North Cyprus economy with a particular emphasis on its response to economic embargoes. The paper also examines how important economic embargoes would be (or have been) in the North Cypriot economy. For this purpose total economic growth is decomposed with respect to different components of demand. The results show that despite the presence of embargoes, external demand and the availability of import flows are detrimental factors for economic growth. Also domestic final demand is an equally important source of growth in the North Cyprus economy

Openness to Trade and Structural Changes in the Sources of Economic Growth and Labour Demand in Turkey

The Turkish economy has undergone drastic structural changes since 1980. While the effects of the Turkish adjustment programme have drawn considerable attention, a few studies have investigated its employment impacts. Unlike neoclassical expectation behind the structural adjustment programme, some studies for Turkey have showed that this policy change in 1980 caused a decline in employment. Results show that the Turkish industrialisation strategy cannot be regarded as export-led industrialisation strategy. Extra output created by exports has been very limited during the post-liberalisation period. However domestic final demand has continued to be the most dominant determinant of output growth. A Surprising result of the paper appears for the period of 1985-1990 when import substitution in final demand created output growth particularly in technology-intensive manufacturing and other manufacturing sectors. However import penetration in final and intermediate goods overwhelmingly important factors creating de-industrialisation in the period of 1990-1996. This paper, however, examines the sources of changes in employment. Despite neoclassical expectations, the reform period after 1982 witnessed large factor substitution against labour, even in the tradable goods sector. Additionally, labour demand also appears to response to output growth less in the post-liberalisation period than before

Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment

After the economic turmoil in 2001, the Turkish economy quickly recovered, and exhibited distinguished economic performance in successive years without any interruption. This success can be considered as a product of favourable international economic conditions, sound macroeconomic reforms, the beginning of the accession talks with the EU and political stability with a single party government. All these favourable conditions have allowed the Turkish economy to not have experienced any financial restraints in financing this distinguished economic performance. While increased expenditure, particularly in consumption and investment, together with high foreign demand for Turkish production, appear to have played an important role in these growth rates, the economy has begun to experience a large surge in imports and current account deficits in response to an increase in domestic expenditure. The purpose of this paper is to examine the role of macroeconomic components of aggregate expenditure in determining import demand in Turkey. Along with the empirical assessment, the paper also suggests a theoretical model of import demand, which is built upon a utility maximization of a country subject to budget constraints. The empirical model derived as a dynamic form of linear expenditure system was estimated with quarterly data from the Turkish economy for the period of 1987-2006. The results show that consumption and expenditure are two important demand components in determining imports in the long run whereas only the growth rates of consumption and investment are dominant factors in the short run. Public expenditure appeared to have no significant impact on import demand in Turkey

Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment

After the economic turmoil in 2001, the Turkish economy quickly recovered, and exhibited distinguished economic performance in successive years without any interruption. This success can be considered as a product of favourable international economic conditions, sound macroeconomic reforms, the beginning of the accession talks with the EU and political stability with a single party government. All these favourable conditions have allowed the Turkish economy to not have experienced any financial restraints in financing this distinguished economic performance. While increased expenditure, particularly in consumption and investment, together with high foreign demand for Turkish production, appear to have played an important role in these growth rates, the economy has begun to experience a large surge in imports and current account deficits in response to an increase in domestic expenditure. The purpose of this paper is to examine the role of macroeconomic components of aggregate expenditure in determining import demand in Turkey. Along with the empirical assessment, the paper also suggests a theoretical model of import demand, which is built upon a utility maximization of a country subject to budget constraints. The empirical model derived as a dynamic form of linear expenditure system was estimated with quarterly data from the Turkish economy for the period of 1987-2006. The results show that consumption and expenditure are two important demand components in determining imports in the long run whereas only the growth rates of consumption and investment are dominant factors in the short run. Public expenditure appeared to have no significant impact on import demand in Turkey