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| Title: | Political Economy Perspectives on the 1994 Turkish Economic Crisis: A CGE Modeling Analysis |
| Authors: | Yeldan, A. Erinc |
| Issue Date: | 1995 |
| Series/Report no.: | Bulletin 95-3 |
| Abstract: | This paper investigates the role of the deterioration of the Turkish public
sector balances in the latter half of the 1980's and the evolution of the
economic crisis with the aid of a computable general equilibrium model. The
theoretical basis of the model utilized in the paper rests upon the Walrasian
and the Structuralist/Keynesian macro foundations. The model recognizes 15
production sectors, 3 socio-economic income groups and a central government;
and simulates the production, income distribution, consumption, capital
accumulation and foreign trade processes of the national economy within a
simultaneous system of algebraic equations. The distinguishing feature of the
model is that, it accommodates monopolistic mark-up pricing rules in the
industrial sectors, and endogenously solves for capacity utilization and
unemployment level through Keynesian mechanisms of effective final demand.
The model investigates the evolution of the crisis under three main headings:
(i) the role of the financial crisis and the unprecedented deficit in the
public sector balances; (ii) the roles of the foreign borrowing strategy of
the state and the short term foreign capital inflows on balance of payments
and the foreign exchange rate; and (iii) the role of the political-economic
relations of income distribution and inflationary processes emanating from
real wage increases and non-competitive pricing behavior in the industrial
sectors.
The general equilibrium results of the model underscore the importance of
intra-class relations of income distribution and conflict in the evolution of
price movements in the Turkish economy; and suggest that the sources of the
crisis lie in the historical role of the administrative interventions of the
state towards protection of the capitalist and rural incomes, which would
otherwise be squeezed out in favor of wage-labor in the late-1980's. |
| URI: | http://purl.umn.edu/7460 |
| Institution/Association: | University of Minnesota>Economic Development Center>Bulletins |
| Total Pages: | 41 |
| Language: | English |
| Collections: | Bulletins
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