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Financial determinants of private investment in Turkey. An Euler Equation Approach to Time Series

Author

Listed:
  • Öner Güncavdi

    (Istanbul Technical University)

  • Michael Bleaney

    (University of Nottingham)

  • Andrew McKay

    (University of Bath)

Abstract

This paper employs a dynamic investment model derived from maximising the intertemporal discounted cash flow of a representative firm subject to capital market imperfections, borrowing constraints, and capital adjustment costs. The model is used to test the role of capital market imperfections before and after financial liberalisation undertaken in Turkey. The model is tested on aggregate data. The results demonstrate that the important role of credit constraints in the determination of private investment expenditure and show that financial reforms in the early 1980s have not relaxed these constraints significantly.

Suggested Citation

  • Öner Güncavdi & Michael Bleaney & Andrew McKay, 2006. "Financial determinants of private investment in Turkey. An Euler Equation Approach to Time Series," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 2(2), pages 83-106, Enero-Jun.
    • Handle: RePEc:qua:journl:v:2:y:2006:i:2:p:83-106
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Euler Equation; Financial Liberalisation; Capital Markets; Investment; Turkey;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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