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The Impacts of the Global Crisis on the Turkish Economy and Policy Responses

Hasan Cömert and Mehmet Çolak ()

No 1417, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: This paper focuses on the impacts of the recent global crisis on the Turkish economy and the policy measures taken in response to the crisis. Turkish economy was adversely affected by the crisis through mainly three channels, namely expectations channel, trade channel and financial channel. The distinctive characteristic of the crisis was a severe export shock which can account for an important part of the decline in production in Turkey. Beside this, a significant sudden stop in financial flows worsened the credit conditions in the economy. As a result, the Turkish economy witnessed one of its worst economic down-turns after the Second World War. In fact, the Turkish growth performance was one of the worsts among developing countries. However, as opposed to previous crises, the financial markets in Turkey and many other developing countries did not experience a collapse. We argue that this is mainly related to the small magnitude and short duration of the financial shocks hitting Turkey and other developing countries relative to the ones in the previous decades. In this sense, the Turkish economy might not have been fully tested during the last global crisis. How the economy will behave in case of a larger financial shock is still unknown.

Keywords: Turkish Economy; Developing Countries; Recent Global Crises; Financial Flows; Monetary and Fiscal Policies. (search for similar items in EconPapers)
JEL-codes: F32 E63 E66 G01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-ias and nep-mac
Date: 2014-12, Revised 2014-12
References: View references in EconPapers View complete reference list from CitEc
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http://erc.metu.edu.tr/en/system/files/menu/series14/1417.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:1417

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