- International Monetary Fund
- Published Date:
- November 2005
Financial Programming and Policy
The Case of Turkey
With contributions from
IMF Institute 2000
©2000 International Monetary Fund
Cover. Sanaa Elaroussi and IMF Graphics Section
Barth, Richard C. (Richard Carl)
Financial programming and policy : the case of Turkey / Richard Barth, William Hemphill, with contributions from Irina Aganina... [et al.]. — Washington, D.C. : IMF Institute, 2000.
p. ; cm. (and diskette; 3 1/2 in.)
Includes bibliographical references.
1. Finance — Turkey. 2. Turkey — Economic policy. 3. Economic development–Turkey. 4. Structural adjustment (Economic policy) — Turkey. 5. Turkey — Economic conditions–1960. 6. Industrial productivity–Turkey. 6. Prices — Turkey. I. Hemphill, William. II. Aganina, Irina. III. IMF Institute. IV. International Monetary Fund.
HG186.T9 B37 2000
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This volume contains a series of workshops designed to introduce readers to the process of formulating a macroeconomic adjustment program. The design of a consistent set of policies intended to move an economy toward internal and external balance is a central task of the financial programming courses offered by the IMF Institute.1 Selected parts of this volume are used in both the basic and advanced policy courses given at the IMF in Washington, D.C.2
The workshops present the macroeconomic concepts and accounting and behavioral relationships needed to develop, step-by-step, a reference scenario for the Turkish economy for a selected program year based on the assumption that macroeconomic policies from the preceding year will remain unchanged. Depending on the assessment of financial and structural problems that emerges from the reference scenario, a program scenario can then be designed with an alternative set of policies. The selected initial program year in these workshops is 1996, and medium-term projections with both sets of policies extend through 2000.
Turkey is a middle-income developing country. In the mid-1960s, its level of per capita GDP was comparable to that of Korea, and in the mid-1970s, to Thailand. Turkey’s economy has made great strides in industrializing, but along an uneven course and not without setbacks and significant stabilization problems. It therefore presents a wide range of issues concerning the role of stabilization policies in development and growth. Among the distinguishing features of Turkey are its geographic proximity to major markets in Europe and the Middle East, its mix of exports between agricultural and manufactured goods, and its relatively open trading and financial system. In the 1980s Turkey became the object of academic scrutiny because of its strong turn away from inward-oriented trade policies and the rapid export growth that followed. Since then, it has lived with high but variable rates of growth and inflation, and it has fallen behind both Korea and Thailand in its effort to raise per capita real GDP. The aid donors and international organizations that provided capital to finance investment in Turkey in pre-reform decades have been partly supplanted by the private capital flows (see Part I). The interaction between highly mobile capital flows, monetary policy, and a managed floating exchange rate regime add to the complexity of and limitations on macroeconomic policy design.
Part I of this volume is a brief survey of the Turkish economy included to provide background information for the accounting, forecasting, and programming chapters that follow, and was prepared by William Hemphill based on IMF and OECD staff surveys and published works about Turkey. Part II was adapted by Susan George and William Hemphill from Macroeconomic Accounting and Analysis in Transition Economies by Abdessatar Ouanes and Subhash Thakur (Washington: International Monetary Fund, 1997), which draws on Financial Policy Workshops: The Case of Kenya (Washington: International Monetary Fund, 1981) and the unpublished country-based workshop volumes produced by the IMF Institute for headquarters and overseas training in the intervening years.
In Part III, the chapter on output and prices was prepared by Jukka Paljarvi, the fiscal chapter by Joshua Greene and William Hemphill, the balance of payments chapter by William Hemphill, the monetary chapter by Susan George and Richard Barth, and the financial programming chapter by Richard Barth. The chapter on medium-term projections was developed by Irina Aganina and subsequently adapted by Caryl McNeilly and Richard Barth. The econometric estimation in all chapters was carried out by William Hemphill, who also wrote the chapter appendices in Parts II and III excepting the first three following Chapter 7. Mr. Hemphill also wrote the sections on the structure and institutions of the Turkish economy except Section d, Chapter 4.
The data base was compiled by Susan George and William Hemphill with assistance from Rosa Vera-Bunge, Linda Galantin, and Chi Nguyen, who also prepared the tables and figures. The regression output reported in this volume was generated using PcGive.3 Arthur Rios assisted with the regression analysis at several points. Various desktop versions of the volume were processed and produced by Deanna Kaufmann assisted by Brian Manuel and Maryse Dube. The preparers are grateful to Eric Clifton for his support. The project was edited in its entirety by Richard Barth and William Hemphill and supervised by Richard Barth.
Earlier versions of these Turkey workshops have been in use in Institute headquarters courses since early 1997. The contributors named above express their thanks to users of the early versions for the numerous helpful comments received from them. We note especially the suggestions of Muneesh Kapur of the Reserve Bank of India, Joong Shik Lee of the Bank of Korea, Alexey Medvedev of the Central Bank of the Russian Federation, and Sukru Binay and Adnan Eken of the Central Bank of the Republic of Turkey. Paijit Habanananda and Armida San Jose of the IMF Statistics Department provided helpful advice on numerous accounting questions. Rakia Moalla-Fetini, country economist for Turkey in the IMF’s European I Department, supplied cheerful assistance in interpreting Turkish institutions and practices. Ling Hui Tan, a staff member in the Institute, offered numerous comments on the flow-of-funds and forecasting chapters. Juanita Roushdy and Jeanette Morrison, in the External Relations Department, kindly guided the document and its preparers through the process of publication.
Any opinions expressed are those of the various preparers and do not necessarily reflect the views of the Turkish authorities, Executive Directors of the IMF, or other members of the IMF staff. The preparers bear sole responsibility for any errors that may remain.
The use of changes in macroeconomic policies to move an economy toward internal and external balance is referred to in this document by its traditional IMF name, “financial programming.”
See also IMF Institute, Financial Programming and Policy: The Case of Sri Lanka (Washington: International Monetary Fund, 1996).
Jurgen A, Doornik and David F. Hendry, PcGive 8.0: An Interactive Econometric Modelling System (London: Chapman and Hall, 1995),