Patterns of Adjustment under the Age of Finance: The Case of Turkey as a Peripheral Agent of Neoliberal Globalization

Turkey experienced a severe economic and political crisis in November 2000 and again in February 2001.� The IMF has been involved with the macro management of the Turkish economy prior to�and after the crisis, and provided financial assistance of $20.4 billion between 1999 and 2003.� Following the crisis, Turkey implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. The government was forced to follow a contractionary fiscal policy�to attain a primary surplus of 6.5% of the GNP, and promised to satisfy the customary IMF demands: reduce subsidies to agriculture, privatize, and reduce the role of the public sector in economic activity. � Contrary to the traditional stabilization packages that aim to�increase interest rates to constrain domestic demand, the new orthodoxy aimed at maintaining high interest rates to attract speculative foreign capital.�The end result in Turkey�was shrinkage of the public sector; deteriorating education and health infrastructure; and failure to provide basic social services to the middle class and the poor.� Furthermore, as the domestic industry intensified its import dependence, it was forced to adopt increasingly capital-intensive, foreign technologies with adverse consequences on domestic employment. �In the meantime the transnational companies and the international finance institutions have become the real governors of the country, with implicit veto power over any economic and or political decision that is likely to act against the interests of global capital.�

On the Nature and Causes of the Collapse of the Wealth of Nations, 2007-2008: The End of a Façade Called Globalization

In this working paper, Erinç Yeldan investigates the 2007-2008 financial crisis, hailed as the most devastating (and complex) crisis of capitalism since the great depression of 1929. He suggests that the 2007-2008 crisis was not the end result of a series of technical errors or ad hoc developments that occurred on their own, but was instead the result of the systemic imbalances of capitalism over the last three decades. In order to evaluate the conditions of the global crisis more clearly, Yeldan considers it critical that its underlying structural causes are understood. The paper reflects the Marxian literature on crises, prominently that of Rosa Luxemburg, pointing out to the necessity of a ‘corrective war’ in order to break with old institutions, old technologies, and old methods of accumulation.Crises of capitalism; Bretton Woods system, golden age of capital; financialization; corrective war

Interest Rate Smoothing and Macroeconomic Instability under Post-Capital Account Liberalization Turkey

This Working Paper studies how the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) has evolved under the post-financial liberalization and deregulation era. Utilizing econometric methods on a generalized form of a Taylor Rule the authors search for the possible revelation of a variety of determinants of monetary policy with different objectives over 1994-2007. They find that over such an extended time horizon during which significant shifts in the macroeconomic environment have occurred, the CBRT’s almost exclusive focus on “interest rate smoothing” has not changed; and that the CBRT has not paid any attention to developments in national income. <p></p> This raises the question whether there is a deeper underlying structural constraint, binding the CBRT’s alleged “independence”. The authors trace the basics of this deep structural constraint to the nature of the global financial system restricting the ability of the central banks to pursue “independent” policy objectives.

On Turkey's European Trade Policy: How Desirable is a Status Quo

International Relations/Trade,

Financial liberalization and fiscal repression in Turkey: Policy analysis in a CGE model with financial markets

Cataloged from PDF version of article.The effects of recent Turkish financial liberalization reforms on the real economy are investigated with the aid of a computable general equilibrium model that incorporates financial markets. The model is used for conducting counterfactual and comparative static simulation experiments to analyze three sets of issues: (1) the real side effects of the government's mode of financing its fiscal deficit through debt instruments or monetization; (2) the effects of deregulation of the public debt instrument issuing rules on the financial markets; and (3) the domestic implications of the continued external debt servicing and the foreign exchange rate devaluations. (C) Society for Policy Modeling, 199

An Open Economy Model of Political Influence and Competition Among Rent Seeking Groups

The paper develops a formal model of government's economic decisions as influenced by private agents within the context of neoclassical political economy. The government is assumed to form preferences over interest groups in the economy; in turn these preferences are influenced by the rent seeking behavior of these groups. An open, two-household, two-sector general equilibrium model is constructed to depict an environment in which preference-maximizing (rational) individuals allocate otherwise productive labor to directly unproductive rent seeking activities in order to exert political pressure on the government's choice of policy instruments. With the aid of five comparative-static experiments, the game-theoretic component and the second-best nature of the rent seeking environment is discussed. Insights are also provided on the influence of technological change, and changes in lobbying efficiency on resources allocated to rent seeking by interest groups. Key words: Rent Seeking, Political Economy, General Equilibrium.Political Economy,

How the Asian crisis affected the world economy : a general equilibrium perspective

Financial crises

An intertemporal, multi-region general equilibrium model of agricultural trade liberalization in the South Mediterranean NICs, Turkey, and the European Union

With the aid of an intertemporal, multi-region general equilibrium model, the authors study issues of agricultural trade liberalization, growth and capital accumulation in the context of a world economy moving towards a multi-polar structure. They specifically focus on Turkey, the European Union, the Middle East, and the Economies in Transition; and study alternative scenarios of formation of customs unions and increased trade orientation. The model is based on intertemporal general equilibrium theory with Ramsey-type dynamics. The world economy is fully endogenized within a 9-region specification, with Turkey, EU, Middle East and the Transition Economies constituting as one of the indigenous regions. A key feature of the model is its explicit recognition of both the commodity and foreign capital flows across regions in an endogenous setting, and its explicit portrayal of the out-of-steady state dynamics under an intertemporal optimization framework. They explore the short- versus the long-run economic impacts of alternative trade and investment policies on agricultural production, foreign trade, resource allocation, accumulation, consumer welfare, and income distribution in the regions of analyis. The results reveal significant gains from increased bilateral trade between the identified regions, and further underscore the crucial importance of financing commodity trade deficits in sustaining the accumulation patterns.Economics Models. ,Trade liberalization. ,Foreign trade Mathematical models. ,Agricultural trade. ,TMD ,

How Fiscal (Mis)-Management May Impede Trade Reform: Lessons From an Intertemporal, Multi-Sector General Equilibrium Model for Turkey

We utilize a multi-sector general equilibrium model based on intertemporally optimizing agents to study issues of trade liberalization and fiscal adjustments in the context of the Turkish economy. A key feature of the model is its explicit recognition of the distortionary consequences of excessive borrowing requirements of the public sector through increased domestic interest costs. The model results suggest that the postponement of adjustment to growing public debt and fiscal imbalances could be detrimental; and that in the absence of coordinated fiscal reforms, the welfare gains expected from trade liberalization may significantly be negated.International Relations/Trade,