Investigation on sources of growth for Turkey, 1968-1998

Abstract

The purpose of this thesis is to analytically evaluate the correlations between growth and selected macroeconomic indicators under the dynamic macroeconomic adjustments of a globalizing developing economy, Turkey, 1968-1998. First, I illustrate the development patterns of investment, fiscal, trade and monetary variables under the post-1968 path. Within the boundaries of this fragile macroeconomic environment, I discuss how much confidence should one have on the relationship between various macroeconomic indicators and growth. Next, I present the sensitivity analysis for basic growth variables, and fiscal, trade and monetary variables by using a variant of the Extreme Bounds Analysis (EBA). I found that very few economic indicators are robustly correlated with growth rates or the share of investment in GDP. Consequently, among the variables which are always included in the growth regressions, only human capital indicator is robust. Interestingly, in spite of the “dramatic” shift against productive sectors, the share of housing investment is positively and significantly correlated with growth. I found that none of the fiscal and trade indicators that I studied is robustly correlated with growth or the investment share. My econometric investigation further suggests that monetary indicators have not provided a statistically robust impetus on GDP growth.