Due to the accelerating pace of globalization, world economic and financial development has become closely tied to the ups and downs of the US economy. This process has become particularly visible after the 1997 Asian financial crisis. The most...
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ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
Signatur:
DS 145 (2012,4)
Fernleihe:
keine Fernleihe
Due to the accelerating pace of globalization, world economic and financial development has become closely tied to the ups and downs of the US economy. This process has become particularly visible after the 1997 Asian financial crisis. The most notable characteristic of globalization is the massive amounts of financial capital flowing across national borders. Following the financial liberalization in the late 1980s, Turkish economy has attracted significant amounts out of the short-term capital floating around the world, particularly because of the governments' tendency to finance excessive public spending through the sale of government bonds. The governments' reluctance to cut spending or increase taxes has pushed (real) interest rates so high up that Turkey has, at times, become the recipient of sizable short-term capital, causing Turkish Lira (TL) to appreciate and get overvalued. This inflow of short-term capital was quickly reversed, as soon as it became clear that the overvaluation of the TL could not be sustained, due to the resulting problems in the current account. Thus, the increasing degree of openness made the Turkish economy susceptible to the effects of shortterm capital movements, sometimes contributing to the outbreak of severe crises. This paper describes the making of recent crises in the Turkish economy by focusing on the role of large public deficits and short-term capital movements. -- Financial liberalization ; Short-term capital flows ; Public deficits ; Overvaluation-Current Account Deficits ; Banking crisis
