Title: Openness and financial development: time series evidence for Turkey
Author: Senay Acikgoz; Mehmet Balcilar; Bedriye Saracoglu
Department of Econometrics, Faculty of Economic and Administrative Sciences, Gazi University, 06500 Ankara, Turkey.
Department of Economics, Faculty of Business and Economics, Eastern Mediterranean University, Famagusta, Turkish Republic of North Cyprus via Mersin 10, Turkey.
Department of Econometrics, Faculty of Economic and Administrative Sciences, Gazi University, 06500 Ankara, Turkey
Journal: Int. J. of Banking, Accounting and Finance, 2012 Vol.4, No.2, pp.172 - 201
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.
Keywords: financial development; financial openness; trade openness; bounds testing approach; Turkey; real GDP; gross domestic product; liberalisation; capital accounts; trade accounts.
Available online 31 Jul 2012