Fiscal Policy and External Performance: The Turkish Experience

International Monetary Fund

No 1989/020, IMF Working Papers from International Monetary Fund

Abstract: In 1980 Turkey embarked on a far-reaching stabilization and liberalization program, which contributed to export-led growth and a significant movement toward both domestic and external equilibrium. Later, as fiscal policy was partly reoriented from a restrictive to an expansionary stance while adhering to a flexible exchange rate policy, inflationary pressures intensified but the external current account did not deteriorate. Counterfactual simulations, performed with a computational general equilibrium model, suggest that Turkey would have experienced a significantly lower inflation rate, with only a small reduction in growth, if it had adopted a less expansionary fiscal stance.

Keywords: WP; GNP; exchange rate; deficit; real GNP; fiscal policy; balance of payments; rate of depreciation; time deposit; GNP deflator; private sector; current account deficit; central bank; public expenditure; GNP growth; price level; terms of trade; Current account; Exchange rate adjustments; Exchange rate flexibility (search for similar items in EconPapers)
Pages: 28
Date: 1989-01-01
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