https://orcid.org/0000-0002-5255-9653
![Sample our Area Studies journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5922/TOC-Subject-Sample-2021-Area-Studies.jpg"})
ABSTRACT
This study aims to unweil the determinants of financial development, particularly the impact of industrialization, democracy, and financial openness on financial development in Turkey over the 1975–2015 period, using a bounds testing approach. It is found that (i) financial development and its main determinants are co-integrated; (ii) democracy is positively associated with financial development, whereas financial openness is associated with lower financial development; and (iii) industrialization is not a significant determinant of financial development in Turkey. Based on the obtained results, some recommendations are also provided.
Acknowledgements
The author is grateful to two anonymous reviewers for their insightful comments and suggestions, which enhanced the quality of this paper.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on contributor
Selçuk Akçay is a Professor in the Department of Economics at Afyon Kocatepe University, Turkey. His main research field is applied economics. His current research area includes asymmetric impact of oil price on remittance inflows and outflows, determinants of private investments, savings and financial development. He has published in Applied Economic Letters, International Migration and Cato Journal.
ORCID
Selçuk Akçay http://orcid.org/0000-0002-5255-9653
Notes
1 World Bank, World Development Indicators (WDI).
2 IMF, “Turkey: Financial System Stability Assessment.”
3 BRSA, “Turkish Banking Sector.”
4 World Bank, “Turkey’s Transitions.”
5 Svirydzenka, “Introducing a New Broad-Based Index.”
6 In 2011, the Turkish government launched a set of ambitious targets known as ‘2023 Vision.’ The ‘2023 Vision’ contains 63 social, political and economic goals targeted to be achieved by 2023.
7 Peseran et al., “Bounds Testing Approaches.”
8 Girma and Shortland, “The Political Economy of Financial Development.”
9 Menaldo and Yoo, “Democracy, Elite Bias.”
10 Ghardallou, “Does Democratic Transition Spur Financial Development?”
11 Shahbaz, Bhattacharya, and Mahalik, “Financial Development, Industrialization.”
12 Kaminsky and Schmukler, “Short-Run Pain.”
13 Law and Azman-Saini, “Institutional Quality, Governance.”
14 Herwartz and Walle, “Openness.”
15 Zhang, Zhu, and Lu, “Trade Openness, Financial Openness.”
16 Chen, Hamori, and Kinkyo, “Financial Development.”
17 UNIDO, “Industrial Development Report 2016,” 27.
18 For a comprehensive discussion see Szirmai, “Industrialization.”
19 Cameron et al., Banking in the Early Stages.
20 O’Sullivan et al., “What Is New.”
21 Lechevalier, Debanes, and Shin, “Financialization and Industrial Policies.”
22 Shahbaz, Bhattacharya, and Mahalik, “Financial Development, Industrialization.”
23 Ibid.
24 Weingast, Haber, and North, “Political Institutions.”
25 Haber, “Political Institutions.”
26 Sirowy and Inkeles, “The Effects of Democracy.”
27 La Porta, Lopez-De-Silanes, and Shleifer, “Government Ownership of Banks.”
28 Girma and Shortland, “The Political Economy of Financial Development.”
29 Menaldo and Yoo, “Democracy, Elite Bias.”
30 Ghardallou, “Does Democratic Transition Spur Financial Development?”
31 Mandon and Mathonnat, “Forms of Democracies.”
32 Yang, “Does Democracy Foster Financial Development?” 262–5.
33 Aluko and Ajayi,“Determinants of Banking Sector Development.”
34 Baltagi, Demetriades, and Law, “Financial Development and Openness”; and Hauner, Prati, and Bircan, “The Interest Group Theory.”
35 Pagano, “Financial Markets.”
36 Klein and Olivei, “Capital Account Liberalization.”
37 Kose, Prasad, and Terrones,“Does Openness to International Financial Flows.”
38 Levine, “International Financial Liberalization.”
39 Chinn and Ito,“What Matters.”
40 Obstfeld, “International Finance.”
41 Rajan and Zingales, “The Great Reversals.”
42 Law, “Openness and Financial Development.”
43 Rajan and Zingales, “The Great Reversals.”
44 Dell’Ariccia, and Marquez, “Information and Bank Credit Allocation”; Ranciere, Tornell, and Westermann, “Decomposing the Effects”; Daniel and Jones, “Financial Liberalization”; Kaminsky and Schmukler, “Short-Run Pain”; Law and Azman-Saini, “Institutional Quality”; Herwartz and Walle, “Openness”; Zhang, Zhu, and Lu, “Trade Openness, Financial Openness”; and Chen, Hamori, and Kinkyo, “Financial Development.”
45 Acikgoz, Balcilar, and Saracoglu, “Openness and Financial Development.”
46 Rajan and Zingales, “The Great Reversals.”
47 Ayadi et al., “Determinants of Financial Development.”
48 Eryiğit, Eryiğit, and Dülgeroğlu, “Local Financial Development.”
49 Levine, Loayza, and Beck, “Financial Intermediation and Growth”; Odhiambo, “Financial Depth”; Kim, Lin, and Suen, “Dynamic Effects of Trade Openness,” 254–61; Huang, Determinants of Financial Development; Bittencourt, “Inflation and Financial Development”; Yu, Hassan, and Sanchez, “A Re-Examination”; Elgin and Uras, “Is Informality a Barrier”; Ghardallou, “Does Democratic Transition Spur Financial Development?”; and Elkhuizen et al., “Financial Development, Financial Liberalization.”
50 Yu, Hassan, and Sanchez, “A Re-Examination.”
51 Gurley and Shaw, “Financial Structure”; and Jung, “Financial Development and Economic Growth.”
52 Law and Habibullah, “The Determinants of Financial Development.”
53 Huang, Determinants of Financial Development.
54 Luo, Zhang, and Zhu, “Openness and Financial Development in China.”
55 Svaleryd and Vlachos, “Markets for Risk.”
56 Rajan and Zingales, “The Great Reversals.”
57 Kim, Lin, and Suen, “Dynamic Effects of Trade Openness.”
58 Law and Habibullah, “The Determinants of Financial Development.”
59 English, “Inflation and Financial Sector Size.”
60 Huybens and Smith, “Inflation, Financial Markets”; Ben Naceur and Ghazouani, “Does Inflation Impact”; Khan, Senhadji, and Smith, “Inflation and Financial Depth”; Huang et al., “Inflation”; and Bittencourt, “Inflation and Financial Development.”
61 Odhiambo, “Interest Rate Reform.”
62 The controls on capital account were lifted in the second half of the 1989 in Turkey.
63 Pesaran, Shin, and Smith, “Bounds Testing Approaches.”
64 Ibid.
65 Zivot and Andrews, “Further Evidence.”
66 Shahbaz, Bhattacharya, and Mahalik, “Financial Development, Industrialization.”
67 Girma and Shortland, “The Political Economy of Financial Development.”
68 Zhang, Zhu, and Lu, “Trade Openness, Financial Openness.”
69 Acikgoz, Balcilar, and Saracoglu, “Openness and Financial Development.”
70 Rajan and Zingales, “The Great Reversals.”
71 Law, “Openness and Financial Development.”
72 Acikgoz, Balcilar, and Saracoglu, “Openness and Financial Development.”
73 Law, “Openness and Financial Development.”
74 Bittencourt, “Inflation and Financial Development.”