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Openness and financial development: time series evidence for Turkey

Author

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  • Senay Acikgoz
  • Mehmet Balcilar
  • Bedriye Saracoglu

Abstract

Our study investigates whether trade openness and financial openness have significant impact on financial development using time series data on Turkey for the 1989:1-2007:2 periods. We also investigate Rajan and Zingales (2003) hypothesis that both trade and capital accounts should be simultaneously liberalised in order to achieve financial development. We use four different financial development indicators, commonly employed in the previous literature. The bounds testing and autoregressive distributed lag approaches to cointegration, developed by Pesaran et al. (2001) are used in the estimation process. The empirical findings indicate that all financial development measures show a long-run levels relationship with financial openness, trade openness and real GDP. Consequently, our estimates imply that both financial and trade openness have led to financial development in Turkey. The findings also support the hypothesis of Rajan and Zingales (2003). Marginal effects of financial and trade openness on the financial development indicators imply that Turkey may benefit from trade openness and/or liberalised capital accounts.

Suggested Citation

  • Senay Acikgoz & Mehmet Balcilar & Bedriye Saracoglu, 2012. "Openness and financial development: time series evidence for Turkey," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 4(2), pages 172-201.
    • Handle: RePEc:ids:injbaf:v:4:y:2012:i:2:p:172-201
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    Citations

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    Cited by:

    1. Muhsin KAR & Saban NAZLIOGLU & Huseyin AGIR, 2014. "Trade Openness, Financial Development, and Economic Growth in Turkey: Linear and Nonlinear Causality Analysis," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 8(1), pages 63-86.
    2. Kais Mtar & Walid Belazreg, 2023. "On the nexus of innovation, trade openness, financial development and economic growth in European countries: New perspective from a GMM panel VAR approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 766-791, January.
    3. Esin Cakan, 2018. "Impact of Financial and Trade Openness on Financial Development in Emerging Market Economies: The Case of Turkey," American Journal of Economics and Business Administration, Science Publications, vol. 9(4), pages 71-80, March.
    4. Yilmazkuday, Hakan & Akay, Koray, 2008. "An analysis of regime shifts in the Turkish economy," Economic Modelling, Elsevier, vol. 25(5), pages 885-898, September.
    5. Katircioğlu, Salih Turan & Taşpinar, Nigar, 2017. "Testing the moderating role of financial development in an environmental Kuznets curve: Empirical evidence from Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P1), pages 572-586.

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