Public policy and private investment in Turkey

Abstract

Developing countries trying to emerge from recessionary spirals must recognize the importance of public/private interactions in designing growth oriented adjustment programs. They must appreciate the complex impact of fiscal policy on the economy. Turkey is an interesting country for studying how public policy can stimulate private investment. The reason, is that unlike other high debt countries, Turkey has managed to increase the rate of investment in recent years despite external constraints and high real interest rates. Turkey's strategy nevertheless has limits. The surges in public investment in 1986 and 1987 have since hurt macro stability. Private investment has tilted toward such non-tradables as housing - partly as a result of special credit schemes directed at mass housing and partly because housing investment is an attractive investment against inflation. Unless corrected, this shift could hurt future export prospects.Financial Intermediation,Trade and Regional Integration,International Terrorism&Counterterrorism,Economic Theory&Research,Environmental Economics&Policies