The impact of structural adjustment program on investment in Turkey.
This thesis provides an analysis of investment behaviour in Turkey after the
implementation of structural adjustment programs. The aim of the study is to
investigate the impact of program policies on investment. The validity of neoclassical
economic predictions, which are associated with adjustment programs, is
also discussed. In most parts, a comparative approach is adopted. That is, the
performance in relation to investment after the initiation of structural adjustment is
examined in comparison to that prior to adjustment. The thesis includes a review
of theoretical and empirical investment studies. A large, long-run macro level data
set on investment and other related economic indicators was compiled for the
The impact of reforms is examined on the basis of three key transmission
mechanisms: the public sector, the financial sector and efficiency. An econometric
analysis of investment behaviour on the basis of cointegration and the error-correction
method is used to test the significance of the variables concerned.
Four main findings deserve emphasis. First, the degree of deregulation in Turkey
has been limited by factors such as market structure and the incentive system.
Second, the contributory role of the public sector, especially public investment in
the process of development, can be understood on the basis of a historical
perspective. Third, the experience of Turkey does not provide support for the
predictions of the McKinnon-Shaw hypothesis. That is, financial deregulation
measures have neither increased savings and credits significantly nor led to an
improvement in financial efficiency and intermediation. Finally, overall and
investment efficiency estimates do not suggest a superior performance after the
introduction of structural adjustment. In general, our findings suggest that there
have been crucial structural changes, especially in the distribution of investment
after liberalisation. However, program policies have not necessarily led to an
improvement in the level and the growth rate of total investment.