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

Hasan Cömert and Selman Çolak

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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.

Kuresel Dengesizlikler ve Kriz Tartismasi Isiginda Cari Denge ve Sermaye Hesabini Anlamak

Hasan Cömert and Güney Düzçay

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Bu calisma gelismis ve gelismekte olan ulkelerde cari ve finansal hesaplari kuresel dengesizlikler ve kriz tartismalari isiginda anlamaya calismaktadir. Makalenin iki temel tezi vardir. Birincisi, son kursel krizin harici kaynaklarini anlamak icin net finansal akimlara/cari hesaplara odaklanmak yaniltici olabilir. Minsky-Kindleberger modeline eklemlenmis bir burut akimlar yaklasimi son kuresel krizin harici kaynaklarini cok daha iyi aciklayabilir. Ikincisi, cari hesaplar ve net finansal akimlar gelismis ulkelere gore gelismekte olan ulkelerde daha anlamli gostergelerdir. Burut akimlar derin finansal piyasalari olan ulkelerde onem kazanirken, net finansal akimlar kirilganliklarin harici kaynaklarini anlamak icin gelismekte olan ulkelerde daha gecerli gostergelerdir. Bunun sebebi doviz kuru ve doviz rezervleri gibi etmenlerin gunumuz kuresel finans duzeninde gelismekte olan ulkeler icin hayati bir oneme sahip olmasidir.

Financial Integration and Growth: A Nonlinear Panel Data Analysis

Duygu Yolcu Karadam and Nadir Öcal

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This paper employs Panel Smooth Transition Models (PSTR) to examine the financial integration and economic growth relationship for a large panel data set consisting of 82 countries and for three subsamples, namely emerging, industrial, and developing countries, for 1970-2010 periods. Unlike linear specifications with interaction terms, PSTR models are flexible enough to endogenously determine how the degree of institutional quality, financial sector development, trade openness, budget deficit, inflation volatility and financial integration can have a role in revealing asymmetries in financial integration-growth nexus. Except developing countries, empirical results strongly indicate nonlinear dynamics and imply that the impact of financial integration on growth is asymmetric depending on the threshold effects of these variables which show great variation not only from variable to variable but also for different country groups. As far as whole set of countries is concerned, our findings imply that countries having developed financial systems, qualified institutions and stable macroeconomic environment seem to be benefiting from financial integration. Moreover, nonlinear threshold effects are more apparent and different for emerging countries compared to the industrial countries. Unlike former economies, higher levels of financial integration and trade openness decrease benefits from financial openness for the industrial countries. Besides, high fiscal deficit has more pronounced negative effect on the growth of the industrialized countries compared to emerging economies and other indicators.

Wage Inequality and Wage Mobility in Turkey

Aysit Tansel , Başak Dalgıç and Aytekin Güven

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This paper investigates wage inequality and wage mobility in Turkey using the Surveys on Income and Living Conditions (SILC). This is the first paper that explores wage mobility for Turkey. It differs from the existing literature by providing analyses of wage inequality and wage mobility over various socioeconomic groups such as gender, age, education and sector of economic activity. We first present an overview of the evolution of wages and wage inequality over the period 2005-2011. Next, we compute several measures of wage mobility and explore the link between wage inequality and wage mobility. Further, we compute the transition matrices which show movements of individuals across the wage distribution from one period to another and investigate the determinants of transition probabilities using a multinomial logit model. The results show that overall the real wages increased over the study period and wage inequality exhibits a slight increase.. Wage inequality is one of the highest among the European Union (EU) countries. The wage mobility in Turkey is lower than what is observed in the European Union countries although it increases as time horizon expands. Wage mobility has an equalizing impact on the wage distribution, however; this impact is not substantial enough to overcome the high and persistent wage inequality in Turkey.

Structural Change in Turkish External Trade: Evidence from BEC Sectors

Erdal Özmen and Duygu Yolcu Karadam

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This study investigates export and import dynamics of Turkey in the context of the main Broad Economic Classification (BEC) sectors. Our results suggest that the trade equations do not remain stable when an endogenously estimated regime change is taken account. According to our results, consistent with the elasticity pessimism literature, real exchange rate elasticities of exports and imports are considerably low in absolute value. Exports and imports are basically determined by world real output and domestic real income, respectively, with substantially high elasticities. Consistent with the fact that Turkish integration to global value chains has substantaily increased during the post-2000 period especially in intermediate and capital goods sectors, the real exchange elasticities of exports and imports decrease (in absolute value) during the recent period. Our results suggesting that the external income elasticity of exports, for all sectors, is substantially higher than the domestic income elasticity of imports support that the Houthakker and Magee findings still remains a puzzle even under case of the higher participation in the global value chains.

Reel Doviz Kuru ve Turkiye Dis Ticaret Dinamikleri

Erdal Özmen

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Bu calismada, Turkiye’nin dis ticaret dinamikleri inclenmekte ve ozellikle imalat sanayi (IS) sektorleri icin reel doviz kuru degismesinin dis ticarete etkisi arastirilmaktadir. Bu amacla, ihracat, ithalat ve uretimin belirleyicilerinin teknoloji yogunlugu, urun yetkinligi, ithalat bagimliligi, ihracat yonelimi, kuresel deger zincirlere eklemlenme derecesi, borc dolarizasyonu gibi sektore ozgun degiskenlere de bagli olup olmadigi ampirik olarak incelenmektedir. Calisma sonuclarina gore, Turkiye dis ticaret aciklari, temelde orta-yuksek ve yuksek teknoloji yogunlugu olan urun ithalatindan kaynaklanmaktadir. Sonuclara gore, 1990’li yillarla karsilastirildiginda, 2000’li yillarda ozellikle orta-yuksek ve yuksek teknoloji urunlerinde, IS sektorlerinin kuresel katma deger zincirlerine eklemlenme derecesi yuksek oranda artmistir. Bu eklemlenme, agirlikli olarak sektorlerin geri eklemlenme derecelerinde sicramali bir artis olarak gerceklesmis ve ihracatta yurtici katma deger oraninin yuksek oranda dusmesiyle eklemlenmenin net kaybi daha da artmistir. Esneklik kotumserligi yazini ile tutarli olarak, hem GEGS hem de IS sektorleri ihracat ve ithalatinin reel doviz kuru esnekliginin mutlak degeri goreli olarak dusuk bulunmustur. Ihracat ve ithalat, sirasiyla, agirlikli olarak yurtdisi (OECD) ve yurtici reel gelir tarafindan belirlenmektedir ve esneklikler cok yuksek duzeydedir. Orta-yuksek ve yuksek teknoloji yogunlugu urunlerinin yurtdisi reel kosullara olan duyarliliginin, digerlerine gore, cok daha yuksek oldugu bulunmustur. Urun yetkinligi temelindeki sonuclar da bu onermeyi desteklemektedir. 2001 yili sonrasinda, ihracatin yurtdisi talep esneklikleri tum teknoloji yogunlugu ve urun yetkinligi sektorlerinde sicramali olarak artmistir. Reel doviz kurunun dis ticaret etkisi sektorlerin teknoloji yogunlugu, urun yetkinligi, ithal girdi bagimliligi veya ihracat yonelim derecelerine gore degismektedir. Borc dolarizasyonu ile dis ticaretin reel kur esnekliklerinin ve IS uretiminde olumsuz bilanco riskinin arttigi bulunmustur. Sonuclara gore, IS sektorleri uretimi sadece yurtdisi reel kosullar tarafindan degil kuresel finansal kosullar tarafindan da belirlenmektedir. Reel doviz kurunun uretime etkisi sektorun dis ticaret yapisindan bagimsiz degildir. Tum bu sonuclar, surdurulebiilir yuksek buyume orani ve dusuk dis ticaret acigi icin, reel doviz kuru politikalari yerine, orta-yuksek ve yuksek teknoloji urunleri sektorlerinde kuresel deger zincirlerine ileri eklemlenme derecesini artirmaya yonelik stratejik sanayi politikalarinin tercih edilebilir oldugunu gostermektedir.

Can Financial Stability be Maintained in Developing Countries after the Global Crisis: The Role of External Financial Shocks?

Hasan Cömert and Mehmet Selman Çolak

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In the recent global turmoil, even though some developing economies were severely affected, in general, developing countries survived the crisis with less damage than advanced countries. The majority of developing countries did not experience a financial system collapse. What are the main factors behind the solid performance of many developing countries in the recent crisis? This paper argues that the main reason is the fact that developing countries did not face a strong financial account shock, especially in the form of capital reversals, during this period. In comparison to past developing country crises of the 80s and 90s, the financial account shocks in the global crisis were much more moderate. To a great extent, the fact that advanced countries could not fully serve their roles as safe havens in the global crisis explains why developing economies were not tested by destructive financial shocks in the recent crisis. Furthermore, developing countries enjoyed greater autonomy and legitimacy in implementing expansionary monetary and fiscal policies without much fear of the bigger financial shocks in an environment in which international cooperation partially meet the need for an international lender of last resort through swap operations and credit lines. If the developed countries, essentially European Union (EU) and the US, start serving fully their safe haven roles and the returns in the developed countries become much more attractive, developing countries may face larger external financial shocks. Even large reserves, flexible exchange rate regimes, healthy balance sheets on the papers and some so-called other strong fundamentals would not be enough to avoid financial collapses.

Turkiye Enflasyon Hedeflemesi Deneyiminde Doviz Kurunun Rolu

Ahmet Benlialper and Hasan Cömert

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Doviz kuru ortuk bir politika araci olarak enflasyon hedeflemesi uygulayan gelismekte olan ulkelerde kullanilmis olabilir mi? Bu makale bu soruyu cevaplamak ve enflasyonun belirleyicilerini incelemek icin ornek olarak Turkiye’nin 2002-2008 arasindaki enflasyon hedeflemesi deneyimini incelemektedir. Makalenin temel bulgulari sunlardir: Birinci olarak, Vektor Autoregressif (VAR) modelinden elde edilen sonuclar gostermektedir ki, bu donemde Turkiye’de enflasyonun temel belirleyicileri talep yanli unsurlar degil uluslararasi meta fiyatlari ve doviz kuru gibi arz yanli unsurlardir. Bu durumda, yerli paranin (TL’nin) bu donemde onemli olcude degerlendigini de dusundugumuzde, Turkiye Cumhuriyeti Merkez Bankasi’nin (TCMB) enflasyonla mucadelesinde liranin degerlenmesinden faydalandigi aciktir (bkz. Sekil 2). Bir baska deyisle, 2002-2008 yillari arasinda Turkiye’de yasanan dezenflasyon sureci onemli olcude doviz kurlarinda yasanan gelismelerle aciklanabilir. Ikincisi, ampirik kanitlar gostermektedir ki, TL’nin degerlenmesi TCMB’nin doviz kuruna yonelik asimetrik politika durusuyla iliskilidir. Hem VAR modeliyle yapilan ekonometrik analize hem de betimleyici istatistiklere gore soz konusu donemde liranin degerlenmesine izin verilmis/desteklenmis buna karsin deger kaybi durumunda saldirgan bir sekilde mudahale edilmistir. Biz enflasyon rejimleri altindaki bu durusu “ortuk asimetrik doviz kuru capasi” olarak tanimliyoruz.

Defining and measuring informality in the Turkish labor market

Elif Öznür Acar and Aysit Tansel

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This paper investigates how informality can be defined and measured in the Turkish labor market. Two alternative definitions of informality are used to explore their relevance and implications for the Turkish labor market using descriptive statistics. They are the enterprise definition and the social security definition. Further, contributions of individual and job characteristics to the likelihood of informality are investigated using multivariate probit analysis under the two definitions. The social security registration criterion is found to be a better measure of informality in the Turkish labor market given its ability to capture the key relationships between several individual and employment characteristics and the likelihood of informality. The study suggests that preference should be given to social security definition of labor informality for a more accurate depiction of the Turkish labor market. The suitability of the two alternative definitions of informality in the Turkish labor market and its implications have not been investigated before.

Does private tutoring increase students’ academic performance? Evidence from Turkey

Giray Berberoğlu and Aysit Tansel

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This paper investigates the effectiveness of private tutoring in Turkey. The authors introduce their study by providing some background information on the two major national examinations and three different kinds of tutoring. They then describe how they aimed to analyse whether attending private tutoring centres (PTCs) enhances Turkish students’ academic performance. By way of multiple linear regression analysis, their study sought to evaluate whether the impact of private tutoring varies in different subject areas, taking into account several student-related characteristics such as family and academic backgrounds as well as interest in and perception of academic success. In terms of subject areas, the results indicate that while private tutoring does have a positive impact on academic performance in mathematics and Turkish language, this is not the case in natural sciences. However, as evidenced by the effect sizes, these impacts are rather small compared to the impacts of other variables such as interest in and perception of academic success, high school graduation fields of study, high school cumulative grade point average (CGPA), parental education and students’ sociocultural background. While the authors point out that more research on the impact of further important variables needs to be done, their view is that school seems to be an important factor for determining students’ academic performance.

Gelir Hareketliligi Esitsizlikleri Azaltabilir mi? Turkiye Ornegi

Aytekin Güven , Başak Dalgıç and Aysit Tansel

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Son donemlerde dunya genelinde artan gelir esitsizlikleri, iktisatcilarin dikkatlerini esitsizlikleri dengeleyici faktorlerden biri olarak gorulen bireylerin gelir durumlarini daha ust ya da daha alt gelir gruplarina tasiyabilmeleri olarak adlandirilan gelir hareketliligi konusuna cevirmelerine neden olmustur. Gelir hareketliligi ve esitsizlikler uzerindeki etkileri 2000’li yillardan sonra ve daha cok gelismis ulkeler icin incelenmeye baslanmis ve genel bir sonuca ulasmak icin henuz yeterli sayida calisma yapilmamistir. Bu calisma gelir dagilimi en adaletsiz ulkeler arasinda yer alan Turkiye icin bir gelir esitsizligi ve gelir hareketliligi analizi yaparak gelismekte olan ulke ornegi ile literature katki sunmayi amaclamaktadir. Calismadan elde edilen sonuclar ozetle soyledir: i) Ele alinan donem uzadikca gelir hareketliligi atmaktadir ancak bu hareketlilik gelir esitsizligini azaltici nitelikte degildir. ii) Gelir dagiliminin an alt ve en ust gruplari diger gruplara gore daha hareketlidir. iii) Ele alindan alt donemlerde en alt gelir grubundaki bireylerin %30’u issiz durumuna duserken, yalnizca %1,5’i en ust gelir grubuna yukselebilmistir.

Health Behaviors and Education in Turkey

Aysit Tansel and Deniz Karaoğlan

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This is the first study which provides empirical analysis of the variation in health behaviors for adult men and women in Turkey which is a developing country. The health behaviors considered are smoking, drinking, fruit and vegetable consumption, exercise and body mass index (BMI). We find that in Turkey education is the most important factor that affects the health behaviors. The results indicate that smoking is positively associated with education at all levels with a decreasing effect with the level of education unlike in the developed countries. This result indicates that smoking is a serious public health problem in Turkey at all levels of education. Further, alcohol consumption and schooling are positively related and it increases by the level of education. Higher educated individuals clearly eat more fruits, vegetables and exercise more and their BMI levels are in the normal range compared to less educated and illiterate. We also highlight the importance of demographic factors, labor market status and household income. We use Health Survey of Turkish Statistical Institute (TURKSTAT) for years 2008, 2010 and 2012. This study will provide a baseline for further studies on the various aspects of health behaviors in Turkey.

Globalization, Technology and Skills: Evidence from Turkish Longitudinal Microdata

İlina Srour , Erol Taymaz and Marco Vivarelli

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This paper explores the causes of skill-based employment differentials within the Turkish manufacturing sector over the period 1980-2001. Turkey is taken as an example of a developing economy that, in that period, had been technologically advancing and becoming increasingly integrated with the world market. The empirical analysis is performed at firm level within a dynamic framework using a two-equation model that depicts the employment trends for skilled and unskilled workers separately. In particular, the System Generalized Method of Moments (GMM-SYS) procedure is applied to a panel dataset comprised of 17,462 firms. Our results confirm the theoretical expectation that developing countries face the phenomena of skill-biased technological change and skill-enhancing technology import, both leading to increasing the employment gap between skilled and unskilled workers. In particular, strong evidence of an absolute skill bias emerges: both domestic and imported technologies increase the demand for skilled workers only, not significantly affecting the demand for the unskilled labor. Finally, “learning by exporting” also appears to have a (relative) skill biased impact, increasing the demand for skilled workers to a much larger extent than that for the unskilled.

Exchange Rate Regimes and Business Cycles: An Empirical Investigation

Fatma Pınar Erdem and Erdal Özmen

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This paper investigates the impacts of domestic and external factors along with exchange rate regimes on business cycles in a large panel of advanced and emerging market economies by employing panel logit, cointegration and autoregressive distributed lag model estimation procedures. The results for classical business cycles suggest that emerging market economies tend to experience much deeper recessions and relatively steeper expansions during almost the same duration. The probability of expansions significantly increases with exchange rate regimes flexibility. Our results, different from the bipolar view, strongly support exchange rate regime flexibility for both AE and EME other than the East Asian countries. The impacts of external real and financial shocks and domestic variables are significantly greater under managed regimes as compared to floats. Our results strongly suggest that the evolution and determinants of both classical business and growth cycles are not invariant to the prevailing exchange rate regimes.

Entry to Foreign Markets and Productivity: Evidence from a Matched Sample of Turkish Manufacturing Firms

Başak Dalgıç , Burcu Fazlıoğlu and Deniz Karaoğlan

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We examine the effects of international trading activities of firms on creating productivity gains in Turkey by using a recent firm level dataset over the period 2003-2010. We establish treatment models and investigate the productivity improvements of firms through trade by using Propensity Score Matching (PSM) techniques along with Difference-in-Difference (DID) estimates. Three different groups of treatment are constructed: (i) firms that involve only in importing activities, (ii) firms that involve only in exporting activities, (iii) firms that involve in both exporting and importing activities. The results of the study suggest that both exporting and importing have positive significant effects on total factor productivity (TFP) and labor productivity (LP) of firms. Importing is found to have a greater impact on productivity of firms compared to exporting. Further, two-way trade is found to have more significant effects than those of one-way trade on firm productivity Finally, our results indicate that international trade has greater impact on LP rather than TFP of firms.

Impact of Internal Migration on Political Participation in Turkey

Ali T. Akarca and Aysit Tansel

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During last sixty years, Turkish population moved from one province to another at the rate of about 7-8 percent per five-year interval. As a consequence of this massive internal migration, population residing in a province other than the one they were born in increased from 12 percent in 1950 to 39 percent in 2011. Impact of this population instability on provincial turnout rates in 2011 parliamentary election is studied, controlling for the effects of other socio-economic, demographic, political and institutional factors. Consequences of migration both at destinations and origins are considered. According to robust regressions estimated, the relationship between turnout and education is inverse U-shaped, and between turnout and age, U-shaped. The latter reflects generational differences as well. Large population, large number parliament members to be elected from a constituency, participation by large number of parties, and existence of a dominant party depress the turnout rate. A percentage increase in the proportion of emigrants among the people born in a province reduces turnout rate in that province by 0.13 percentage points, while a percentage increase in the ratio of immigrants in the population of a province reduces it by 0.06 percentage points. However, at destinations where large numbers of immigrants from different regions are concentrated, the opportunity afforded to immigrants to elect one of their own, reduces the latter adverse impact significantly and in some cases turns it to positive.

Changes in Global Trade Patterns and Women's Employment in Manufacturing: an Analysis over the Period of Asianization and De-industrialization

Burcu Kızılırmak , Emel Memiş , Şirin Saraçoğlu and Ebru Voyvoda

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The purpose of this study is to explore the employment effects of changes in manufacturing output resulting from changes in trade patterns over the period 1995-2006. For 30 countries (21 OECD and 9 non-OECD countries) we estimate the changes in embodied labor content due to trade using the factor-content analysis by breaking up the sources of these changes between the trade with the North, the South and China. We also decompose changes in employment into its components as changes within and across sectors. Our results present a net negative impact of trade on total employment in 30 countries over the period of analysis (despite employment gains in 17 countries). In all countries (except for Philippines and Republic of Korea) trade with China has a negative impact on total employment with a stronger negative effect on women’s employment. Employment losses in the South due to surge in imports from China are coupled with declining exports to the North as many countries in the North shift their imports to emerging economies in Asia. Decomposition results indicate that decline in the share of women’s employment is mainly due to shifts between sectors rather than within sector changes. Changes in women’s employment are still highly dependent on the movements in ‘traditional’ manufacturing sectors including food, textiles and wearing apparel.