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

Managing Turkish Debt: An OLG Investigation of the IMF's Fiscal Programming Model for Turkey

Cataloged from PDF version of article.In this paper we investigate the fiscal policy alternatives on domestic debt management, cohort welfare, and growth for the Turkish economy. We utilize a model of exogenous growth in the overlapping generations (OLG) tradition with intertemporally optimizing agents and open capital markets, calibrated to the Turkish economy in 1990s. We examine the macroeconomic effects of the current IMF-led austerity program driven by the objective of attaining primary fiscal surpluses and illustrate the sensitivity of the program targets to growth shocks. Our results suggest that the current fiscal program based on the primary surplus objective succeeds in containing the explosive dynamics of debt accumulation, and yet, the path of aggregate public debt as a ratio to GNP displays significant degree of inertia and would be brought down only gradually and slowly. (c) 2005 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved

The minimal conditions for a financial crisis: a multiregional intertemporal CGE model of the Asian crisis

Cataloged from PDF version of article.The globalization of world capitalism constrains the ability of the developmental state to pursue an independent industrialization and foreign trade strategy. We use an intertemporal, multiregion CGE model, to study the fundamental reasons for a financial crisis. We find that we can create a realistic crisis in the Asia region when capital markets are open and there is an unexpected rise in the risk premium of the Asia region. When capital markets are closed and the state retains all its policy instruments, the Asia region not only avoids a crisis but increases its rate of growth. (C) 2000 Published by Elsevier Science Ltd. All rights reserved

On Turkey's trade policy: Is a customs union with Europe enough?

Cataloged from PDF version of article.Turkey has decided to harmonize its tarification structure with that of the European Union. For the country's authorities, this move to a Customs Union is only meant to be the first step toward integration in the European Union. There are signs, however, that political opposition to the government's procompetitive stance may be strong enough to block any further move toward fuller trade liberalization. We show, using applied intertemporal GE analysis, that to be welfare improving, the trade reform would have to be pursued further and nontariff barriers on European trade removed. Failure to do so could be more detrimental to domestic welfare than no reform at all. (C) 1997 Elsevier Science B.V

Economics of environmental policy in Turkey: A general equilibrium investigation of the economic evaluation of sectoral emission reduction policies for climate change

Cataloged from PDF version of article.Research on climate change has intensified on a global scale as evidence on the costs of global warming continues to accumulate. Confronted with such evidence, the European Union set in late 2006 an ambitious target to reduce its greenhouse gas emissions, by 2020, to 20% below the level of 1990; and invited the rest of the developed economies and the developing world to take part with the Kyoto Protocol. Turkey is the only country that appears in the Annex-I list of the United Nations' Rio Summit and yet an official target for CO2 emission reductions has still not been established. Thus, as part of its accession negotiations with the EU, Turkey will likely to face significant pressures to introduce its national plan on climate change along with specific emission targets and the associated abatement policies. Given this motivation, we utilize a computable general equilibrium model for Turkey to study the economic impacts of the intended policy scenarios of compliance with the Kyoto Protocol and we report on the general equilibrium effects of various possible environmental abatement policies in Turkey over the period 2006-2020. The model is in the Walrasian tradition with 10 production sectors and a government operating within an open macroeconomy environment. It accommodates flexible production functions, imperfect substitution in trade and open unemployment. We focus on CO2 emissions and distinguish various basic sources of gaseous pollution in the model. Our results suggest that the burden of imposing emission control targets and the implied abatement costs could be quite high, and that there is a need to finance the expanded abatement investments from scarce domestic resources. Policies for environmental abatement via carbon and/or increased energy taxes further suffer from very adverse employment effects. This suggests that a first-best policy would necessarily call for a simultaneous reduction on the existing tax burden on producers elsewhere together with introduction of environmental taxes. (C) 2007 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved

Dilemmas of Structural Adjustment and Environmental Policies under Instability

Cataloged from PDF version of article.The Turkish structural adjustment since 1980 has been associated with chronic instability. Since the late 1980s, the weaknesses in the fiscal system and the premature external liberalization emerge as the main factors hindering the passage toward stable growth. Enforced and erratic distributional changes and relative stagnation of capital accumulation have undermined the growth potential of the economy. Further, it is demonstrated that existing market structures may negate environmental policies based on market incentives. These observations, as well as those on the interactions of the market system and the environment, create strong arguments in favor of an active state

Neoliberal global remedies: From speculative-led growth to IMF-led crisis in Turkey

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 both prior to and after the crisis, and provided financial assistance of $20.4 billion, net, between 1999 and 2003. The official stance is that the crisis was the result of the failure of the public sector to maintain the austerity targets and the failure to fully implement the free market rationale of globalization. I argue in this article, however, that contrary to the official wisdom, the current economic and political crisis is not the end result of a set of technical errors or administrative mismanagement unique to Turkey, but is the result of a series of pressures emanating from the process of integration with the global capital markets. I document the fragility indicators of the Turkish financial and fiscal system, and show that the IMF program led to an increase in vulnerability of the financial system throughout 2000-2001. I further argue that the recent wave of structural reforms destined for stability and credibility serve, in fact, mainly the interests of foreign finance capital, and primarily aim at securing the debt obligations of the Turkish arbiters. © 2006 Union for Radical Political Economics

What to smooth: Rate of interest or the foreign exchange? Turkish monetary policy under turbulent times

Cataloged from PDF version of article.This paper studies the new monetary stance of the Central Bank of Republic of Turkey (CBRT) during the Great Recession. We note that characteristics of the post-1997 “great moderation” revealed interest rate smoothing as a valid policy option for the inflation targeting central banks. Utilizing econometric analyses on a general form of a Taylor Rule, we search for the relative weights of the objective function of the CBRT over Jan 2010 – Dec 2013. We find that over the great recession, the CBRT’s focus on “interest smoothing” had been maintained; and yet the burden of adjustment fell disproportionately on the foreign exchange markets. Furthermore, weak credibility of the CBRT, lack of a simple policy rule, and noisy policy communications evidence that pre-requisites of the interest rate smoothing are not being fulfilled. Inevitable sharp policy corrections that follow smoothing periods prove insufficient against the voluminous global flows

Macroeconomics of Turkey's agricultural reforms: an intertemporal computable general equilibrium anlaysis

Cataloged from PDF version of article.Turkey recently launched a set of structural reforms to address elimination of producer price subsidies in its agriculture, and replacing them with a targeted direct income transfer program. The paper investigates analytically viable options of the proposed agricultural-cum-fiscal reform and analyzes the formal links between the public sector fiscal balances, accumulation patterns, dynamic resource allocation, and consumer welfare under a medium-long-term horizon. We utilize a dynamic general equilibrium model. The model results suggest that even though there are expected modest welfare gains of consumers' intertemporal efficiency, the repercussions of these policies on the rural economy and aggregate gross domestic product are likely to be deflationary. (C) 2003 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved

Strategic policies and growth: An applied model of R&D-driven endogenous growth

Cataloged from PDF version of article.We introduce and explore a general equilibrium model with R&D-driven endogenous growth, whose antecedents are the models of Romer (1990) [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy, 98, S71-102] and Grossman and Helpman (1991) [Grossman, G.M., Helpman E., 1991. Innovation and Growth in the Global Economy, The MIT Press, Cambridge]. Utilizing evidence front recent econometric studies on sources of growth, the model also accounts explicitly for cross-border technological spillovers. The model is specified and calibrated to data from Japan, and is solved to obtain both the transitional and the steady-state equilibria. We explore the effects of selective trade and R&D promotion policies on long-run growth and social welfare. The model results suggest that while a strategic trade policy has little effect on re-allocating resources into domestic R&D activities, it can significantly affect the cross-border spillovers of technological knowledge, which, in turn, stimulates growth. We find that trade liberalization may cause the growth rate to fall and lead to a loss of social welfare in the long-run, although it improves welfare in the short-run. R&D promotion policies stimulate growth by inducing private agents to allocate more resources to domestic R&D, as well as to take greater advantage of global R&D spillovers. Here, we find significantly high growth effects together with sizable gains in social welfare at low incidence to tax payers. (C) 1999 Elsevier Science B.V. All rights reserved