Macroeconomic adjustment and private manufacturing investment in Turkey: a time-series analysis |
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| Authors: | Öner Günçavd[idot] Andrew McKay |
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| Institution: | 1. Faculty of Management and Technology and Economic Development Research Centre, Istanbul Technical University, 80680 Macka, Istanbul, Turkey;2. Department of Economics and International Development, University of Bath, Bath BA2 7AY, UK and University of Nottingham, UK |
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| Abstract: | Despite the drastic switch to market-based policies and outward orientation in Turkey during the 1980s, private investment in manufacturing industry has still not revived after seventeen years of structural adjustment. This paper examines the main determinants of private investment in the manufacturing sector and the impacts of structural adjustment (particularly financial liberalisation as an integral part of the reform) on it. The results show that liberalisation policies in financial markets appear to have positive effects by reducing the stringency of quantity constraints on investment while the high interest rates resulting from financial liberalisation had no significant impact on investment. Macroeconomic instability, proxied by the variability of the inflation rate, seems to have discouraged investment in manufacturing. |
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