Macroeconomic policies and structural adjustment under the IMF stabilization program in the Turkish Economy : A computable general equilibrium analysis

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2003
Hwang, Won Joo
The Turkish economy encountered with the two major economic crises in the 1990s after a series of liberalization policies during the 1980s. Despite of the IMF-supported stabilization program after the 1994 financial crisis, the Turkish economy experienced another serious crisis in the 1999-2000 followed by the IMF-directed stabilization program. This experience of the Turkish economy indicates that the IMF-directed stabilization policies do not necessarily guarantee successful outcomes. This fact emphasizes the crucial importance of understanding the structural features and the adjustment mechanisms of the crisis-ridden economy under stabilization policies. mThe purpose of this thesis is to investigate the effects of macroeconornic policies and the structural adjustment mechanism under the IMF stabilization policies in the Turkish economy. A Computable General Equilibrium Model (TURCGE), a real sector CGE model, is constructed for the Turkish economy. Two major policy experiments, capital inflows and devaluation, are implemented under two different settings: normal level and reduced level of the public sector deficits. The model results imply that capital inflows may boost the Turkish economy slightly, but it creates a trade deficit problem that might become unsustainable in the end. Devaluation experiment results indicate that the large public deficits may continue to play a destabilizing role in the Turkish economy in spite of the improvement of trade balance as a result of devaluation. The most important implication of this thesis is that a reduction of public sector deficits is an inevitable prerequisite for the successful performance of the Turkish economy under the IMF stabilization policies.

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Citation Formats
W. J. Hwang, “Macroeconomic policies and structural adjustment under the IMF stabilization program in the Turkish Economy : A computable general equilibrium analysis ,” Ph.D. - Doctoral Program, Middle East Technical University, 2003.