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Turkish Economy in the 1990s: An Assessment of Fiscal Policies, Labor Markets and Foreign Trade

Published online by Cambridge University Press:  21 July 2015

Ahmet Haşim Köse  and
A. Erinç Yeldan
Ahmet Haşim Köse
Affiliation:
National Productivity Center, Ankara and Bilkent University
A. Erinç Yeldan
Affiliation:
National Productivity Center, Ankara and Bilkent University
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Extract

Turkey entered the 1990s under conditions of a truly “open economy”–a macroeconomic environment where its capital account was completely liberalized and the process of financial de-regulation was completed. In this setting, many of the instruments of macro and fiscal control have changed in nature, as the constraints of macro equilibrium have undergone major structural change.

In the early 1990s, the domestic economy witnessed a massive inflow of (mostly short-term) foreign capital. Furthermore, the so-called foreign exchange gap which had constrained the growth potential of Turkey for more than three decades seemed to have been alleviated. The ready availability of foreign exchange enabled the Turkish Lira to appreciate against the major currencies in real terms and led to a rapid expansion of import demand. Moreover, it made possible the financing of both the rapidly growing fiscal deficit of the public sector and the sudden rise of wage costs in the labor market.

Type
Articles
Information
New Perspectives on Turkey , Volume 18 , Spring 1998 , pp. 51 - 78
Copyright
Copyright © New Perspectives on Turkey 1998

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