The Turkish economy in 1981-92: A balance sheet, problems and prospects

Date

1995

Author

Boratav, Korkut
Türel, Oktar
Yeldan, Erinç

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The Turkish economy is facing the risk of relative stagnation towards the next millennium. Without any significant improvement in the efficiency of investments and in the aggregate saving rate, the potential growth rate is significantly lower than that of the 1960s and 1970s. A growth-oriented policy should, in the short-run, aim at a transfer of private to public savings via taxation plus a consolidation of the short term debt burden, allowing for a rise in public investment. Apart from direct and indirect {via crowding-in) positive impacts on total investment, such a move would also have favourable indirect effects on public savings as well. Policy elements with a longer perspective do not come on the agenda before this initial "correction" is done. Two fundamental difficulties before this policy option are (i) the incapacity of the present-day state apparatus to pursue active economic policies and (ii) the level of integration with the international financial system, which undermines the capability to design and implement domestic policies running counter to the dominant economic philosophy. The alternative offered by the prevailing Central Bank/Treasury perspective depends on increased inflow of foreign savings via an appropriate relation between the interest and exchange rates. This misguided policy encourages high domestic interest rates and short-term borrowing from abroad, with adverse impacts on the current account, domestic investment and public savings.

URI

https://hdl.handle.net/11511/108351

Collections

Department of Economics, Article