Volume 7, Issue 3, 34-46.

The Effect of Capital Movements’ Liberalization on Economic Growth: The Case of Turkey

Mehmet MERCAN*

Hakkari University, Department of Economics, Hakkari/TURKEY. E-mail: mercan48@gmail.com; mehmetmercan@hu.edu.tr, Telephone: +90 505 386 69 49.


Adnan Menderes University, Department of Economics, Aydın/ TURKEY. E-mail: opeker@adu.edu.tr; ottopeker@gmail.com, Telephone: +90 505 507 38 64, Office Phone:  +90 256 3477011 Fax:90 256 3477016.


This study investigated the effect of liberalization of the capital movements on economic growth for Turkey for the period 1992-2010 using the vector autoregression (VAR) model. According to results of variance decomposition analysis, economic growth has been affected from both liberalization of capital movements and the financial development that has appeared by the effect of this process. This result, which is very essential for the study, supports the theoretical expectations.  On the other hand, On the other hand, in the impulse and response functions of net capital movements, it has been identified that financial sector reacts in the estimated way but real sector reacts in the opposite way.

JEL Classification: F21; O10.

Key Words: Turkey; Capital Movement Liberalization; Openness; VAR.

*Corresponding author.


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