Files
Abstract
We utilize a multi-sector general equilibrium model based on intertemporally
optimizing agents to study issues of trade liberalization and fiscal adjustments in the
context of the Turkish economy. A key feature of the model is its explicit recognition
of the distortionary consequences of excessive borrowing requirements of the public
sector through increased domestic interest costs. The model results suggest that the
postponement of adjustment to growing public debt and fiscal imbalances could be
detrimental; and that in the absence of coordinated fiscal reforms, the welfare gains
expected from trade liberalization may significantly be negated.