Financial determinants of private investment in Turkey. An Euler Equation Approach to Time Series

Öner Güncavdi (), Michael Bleaney and Andrew McKay
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Öner Güncavdi: Istanbul Technical University
Andrew McKay: University of Bath

EconoQuantum, Revista de Economia y Finanzas, 2006, vol. 2, issue 2, 83-106

Abstract: This paper employs a dynamic investment model derived from maximising the intertemporal discounted cash flow of a representative firm subject to capital market imperfections, borrowing constraints, and capital adjustment costs. The model is used to test the role of capital market imperfections before and after financial liberalisation undertaken in Turkey. The model is tested on aggregate data. The results demonstrate that the important role of credit constraints in the determination of private investment expenditure and show that financial reforms in the early 1980s have not relaxed these constraints significantly.

Keywords: Euler Equation; Financial Liberalisation; Capital Markets; Investment; Turkey (search for similar items in EconPapers)
JEL-codes: E44 F22 O16 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:qua:journl:v:2:y:2006:i:2:p:83-106

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