Dynamics of macroeconomic adjustment in a globalized developing economy: growth, accumulation and distribution, Turkey 1969-1999

Abstract

Our purpose in this paper is to establish stylized facts of the Turkish macroeconomic adjustments using data from 1969 to 1999. We adopt a traditional a priori definition of business cycles as cyclical co-movements of economic variables such as public, private and construction investments, trade balance, labour productivity, wages and fiscal accounts with the cyclical component of real GDP. We also incorporate in our analysis an investigation of the cyclical components of exchange rates, interest rates, price inflation, and the monetary aggregates. Our quantitative findings reveal a robust and significant positive relationship between public and private investments and real GDP growth, suggesting the presence of “crowding in” effects of public investment. Trend growth of manufacturing wages and average labour productivity are loosely associated over the whole period, and the rapid gains in productivity in the post-1980 reform era are not observed to be materialized as gains in remunerations of wage labour. We also find a significant negative correlation of manufacturing wages with merchandise exports and the exchange rate; and document further evidence of the strong negative correlation between variations in consumer prices and production.