An Evaluation of the Turkish stabilization and liberalization policies since 1980, in the light of Southern Cone experience

Abstract

Purpose of this study is to compare the stabilization and liberalization policies implemented in the Southern Cone countries and Turkey. It investigates these policies in a comparative way, and evaluates the Turkish stabilization and liberalization policies in the light of the failure of the Southern Cone reform policies. Policies that were implemented show close similarities in all countries with slight differences, Argentina and Uruguay, for example, opened their capital account before liberalizing their trade. So was the outcomes of the reform policies. All countries initially were able to eliminate external imbalances, to moderate high rates of inflation, and also to achieve high rates of growth compared to prereform periods. However,the shift in stabilization policies in the form of using the exchange rate determination policy (tablita) as an anti-inflationary tool created inconsistencies and undermined the credibility of reform policies in the Southern Cone. Comparing with the Southern Cone, developments aftermath of the reform policies were in favor of Turkey in some aspects. The most obvious one was the higher performance in exports. Nevertheless, in some other aspects,developments resemble to the Southern Cone, such as unsustained monetary and fiscal restrictions and consequently, reemerged high rates of inflation was the common characteristic in all countries. In conclusion, at present, Turkey is at the edge of the success or failure in terms of reform policies that were implemented since 1980, and the success could be realized if corrective actions are taken immediately.