BALANCE OF PAYMENTS CONSTRAINED GROWTH IN TURKEY (1950-2014)

Authors : Mevlüt TATLIYER

Pages : 21-35

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Publication Date : 2017-09-26

Article Type : Research Paper

Abstract :This paper investigates whether Thirlwall’s law, or balance of payments-constrained growth model (BPC) holds for Turkey, using annual data spanning from 1950 to 2014. Unlike previous studies for the country, we tested both original Thirlwall’s law and its modified version with capital flows and interest payments, for a much longer period. The empirical findings indicate that Thirlwall’s law somewhat holds for Turkey and further restrictions imposed by modified version of the Thirlwall’s law do not constitute an important hindrance to economic growth performance directly. Turkey should improve its production base and manage to produce higher quality products for both exports and domestic consumption. Such a policy will solve balance of payments constrained growth problem, by both increasing exports and decreasing income elasticity of demand for imports. 
Keywords : balance of payments constrained, Thirlwalls law, economic growth, Turkey, cointegration