Financial liberalisation and private investment: Evidence from Turkey

Öner Günçavdi, Michael Bleaney, Andrew McKay*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

29 Citations (Scopus)

Abstract

The paper tests for shifts in aggregate private investment functions for Turkey as a consequence of financial liberalisation in the early 1980s. Results for a neoclassical model in error correction form suggest that the short-run dynamics of investment were altered by financial liberalisation, with reduced sensitivity to the availability of credit, but with no evidence of increased sensitivity to the cost of capital. Estimation of an Euler equation model indicates that credit constraints remained binding after liberalisation. We interpret this as evidence of significant structural change to private investment functions after financial liberalisation, but with credit constraints continuing to operate.

Original languageEnglish
Pages (from-to)443-455
Number of pages13
JournalJournal of Development Economics
Volume57
Issue number2
DOIs
Publication statusPublished - 1998
Externally publishedYes

Keywords

  • Financial liberalization
  • Private investment
  • Turkey

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