SHORT-TERM MACROECONOMIC ADJUSTMENT PROCESS IN A DEVELOPING ECONOMY: THE TURKISH CASE, 1960-80 AND 1981-86

Date

1993

Author

Erol, Turan

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In this paper short-run macroeconomic adjustment mechanisms in the Turkish economy have empirically been examined. The main research tool is the aggregate IS-LM model. The IS-LM model adopted presently was originally developed by Leff and Sato (1980) for a closed economy. This model was modified in two respects. First, it was opened by adding a trade balance equation. Second, in order to reflect the changes in economic policy after 1980, a somewhat different adjustment mechanism was taken into account. These modifications led to two alternative versions of the original IS-LM model. The first version relies more on quantitative factors and characterizes the situation before 1980. The second version, however, is specified in terms of more market-determined variables. This, for instance, resulted in a replacement of the supply of credit with the interest rate as adjustment variable. The first version covers the 1960-80 period and uses annual data, and the second version covers the 1980(III)-1986(1V) period and uses quarterly data. As the estimation technique, the instrumental variable method is used.

URI

https://hdl.handle.net/11511/110494

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Department of Economics, Article