Trade openness, financial development and economic growth in turkey: linear and nonlinear causality analysis

Bu makale, ticari açıklık, finansal gelişme ve ekonomik büyüme arasında nedenselliğin yönünü Türkiye için ampirik olarak test etmeyi amaçlamaktadır. Ocak 1989-Kasım 2007 dönemi aylık verileri kullanarak yapılan lineer ve lineer olmayan nedensellik yaklaşımları, i) ekonomik büyüme ve ticari açıklık arasında tek yönlü nedensellik olduğunu, ii) ekonomik büyümenin finansal gelişmeye neden olduğunu ve iii) finansal gelişmenin ticari açıklığa yol açtığını göstermektedir. Lineer ve lineer olmayan yaklaşımlar finansal gelişme, ticari açıklık ve ekonomik büyüme arasında güçlü nedensellik bağlantılarını doğrulamaktadır. Bu sonuçlar, 1989 yılından sonra sermaye hesabında serbestleşme tecrübe eden Türkiye'de, ekonomik büyümenin kısmen dış finansman üzerinden ticari serbestleşmeye bağlı olduğunu ima etmektedir.

Türkiye’de ticari açıklık, finansal gelişme ve ekonomik büyüme: lineer ve lineer olmayan nedensellik analizi

This paper aims at empirically investigating the direction of causality among trade liberalizati- on, financial development, and economic growth in Turkey. By employing monthly data for the period January, 1989- November, 2007, both linear and nonlinear causality approaches indicate that (i) there is bi-directional causality between economic growth and trade openness, (ii) econo- mic growth causes financial development, and (iii) financial development leads to trade liberali- zation. Thereby, linear and nonlinear approaches confirm strong causal linkages among financial development, trade openness, and economic growth in Turkey. These results partially imply that economic growth depends upon trade liberalization through external finance in Turkey which has been experiencing capital account liberalization since 1989.


1. Acaravcı, A. Öztürk, İ. and Acaravcı, S. K., 2007. Finance- Growth Nexus: Evidence from Turkey. International Research Journal of Finance and Economics, 11,pp. 30-40.

2. Acemoglu, D. Johnson, S. and Robinson, J. A., 2001. The Colonial Orijins of Comparative Development: An Empirical Investigation. American Economic Review, 91,pp. 1369-1401.

3. Acemoglu, D. Johnson, S. and Robinson, J. A., 2004. Institutions as the Fundemental Cause of Long Run Growth. NBER Working Paper, No: 10481.

4. Açıkgöz, Ş. Balcılar, M. and Saraçoğlu, B., 2009. Openness and Financial Development: Time Series Evidence From Turkey, Anadolu International Conference in Economics June 17-19, 2009, Eskişehir, Turkey.

5. Aghion, P. Dewatripont, M. and Rey, P., 1997. Corporate Governance, Competition Policy and Industrial Policy. European Economic Review, 41,pp. 797-805.

6. Ağır, H., 2010. Econometric Analysis of the Relationship Between Financial Liberalization and Financial Development, Banking Supervision and Regulation Agency, No.8., Ankara.

7. Akçoraoğlu, A., 2000. Financial Sector and Economic Growth: An Exogeneity Analysis. Ankara University Journal of the Faculty of Political Sciences, 55(1), pp. 1-25.

8. Altıntaş, H. and Ayrıçay, Y., 2009. An Analysis of the Relationship Between Financial Development and Economic Growth with the Approach of the Bonds Test: 1987-2007, X. Conference on Econometrics and Statistics, 27- 29 May, Atatürk University (in Turkish).

9. Andrianova, S. Demetriades, P. and Shortland, A., 2008. Government Ownership of Banks, Institutions and Financial Development, Journal of Development Economics, 85, pp. 218-252.

10. Arestis, P. Demetriades, P. Fattouh, B. and Mouratidis, K., 2002. The Impact of Financial Liberalization Policies on Financial Development: Evidence From Developing Economies. International Journal of Finance and Economics, 7(2), pp. 109-121.

11. Aslan, Ö. and Korap, H.L., 2006. Relationship Between Financial Development and Economic Growth in Turkey, Muğla University Journal of the Institute of Social Sciences, 17, pp. 1-20 (in Turkish)

12. Aslan, Ö. and Küçükaksoy, İ., 2006. Relationship Between Financial Development and Economic Growth: An Econometric Application to the Turkish Economy, İstanbul University, Faculty of Economics, Journal of Econometrics and Statistics, 4, pp. 12-28 (in Turkish).

13. Baek, E. and Brock, W., 1992. A General Test for Nonlinear Granger Causality: Bivariate Model. Working Paper. Iowa State University and University of Wisconsin-Madison; 1992.

14. Bahmani-Oskooee, M. and Domaç, İ., 1995. Export Growth and Economic Growth in Turkey: Evidence from Cointegration Analysis, METU Studies in Development, 22(1), pp.67-77.

15. Baltagi, B, Demetriades, P. and Law, S. H. (2009) Financial Development and Openness: Evidence from Panel Data. Journal of Development Economics, 89, pp. 285 – 296.

16. Bao, Q. and Yang, J., 2007. Does Financial Development Promote International Trade? Frontiers of Economics in China, 2(4), pp. 532-557.

17. Beck, T., 2002. Financial Development and International Trade Is There a Link? Journal of International Economics, 57, pp. 107-131.

18. Bekiros, S.D. and Diks, C.G.H., 2008. The nonlinear dynamic relationship of exchange rates: parametric and nonparametric causality testing, Journal of Macroeconomics, 30, pp. 1641–1650.

19. Ben Naceur, S. Boubakri, N. and Ghazouani, S. 2008. Privatization and Financial Market Development: A Comparison Between MENA Countries and Other Regions. Economic Research Forum, Working Paper No. 390.

20. Bencivenga, V. and Smith, B., 1991. Financial Intermediation and Endogenous Growth. Review of Economic Studies, 58: 195-209.

21. Bilgin, C. and Şahbaz, A., 2009. Causality Relations Between Growth and Export in Turkey, Journal of Social Sciences Gaziantep University, 8(1), pp. 177-198 (in Turkish).

22. Bittencourt, M., 2008. Inflation and Financial Development: Evidence from Brazil. United Nations University, Research Paper No: 2008/14.

23. Blackburn, K. and Hung, V.T.Y., 1998. A Theory of Growth, Financial Development and Trade, Economica, 65, pp. 107-124.

24. Brownbridge, M. Kirkpatrick, C.H. and Maimbo, S.M., 2005. “Financial Regulation in Developing Countries: Policy and Recent Experience”, in C. Green, C. Kirkpatrick and V. Murinde (editors), Finance and Development Surveys of Theory, Evidence and Policy, Cheltenham, UK: Edward Elgar: 154- 180.

25. Chinn, M. and Ito, H., 2006. What Matters for Financial Development? Capital Controls, Institutions and Interactions. Journal of Development Economics, 81, pp. 163-192.

26. Chinn, M.D. and Ito, H., 2002. Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence. NBER Working Paper Series, No: 8967.

27. Creane, S. Goya, R. Mobarak, M. and Sab, R., 2003. Financial development and economic growth in the Middle East and North Africa. Finance and Development, 4(1).

28. Cuadro, L. Gallego, S. and Herrero, A.G., 2003. Why Do Countries Develop More Financially than Others? The Role of the Central Bank and Banking Supervision. Cuadro_Gallego_Garcia-Herrero.pdf (12/12/2008).

29. Cull, R. Senbet, L.W. and Sorge, M., 2001. Deposit Insurance and Financial Development, Policy Research Working Paper, WPS 2682: 1-61.

30. Das, R.U. and Rishi, M., 2010 Are Trade Opennes and Financial Development Complementary? RIS Discussion Papers, 165.

31. Demetriades, P.O., 2008. New Perspectives on Finance and Growth. University of Liecester, Working Paper No: 08/14.

32. Di Giorgio, D., 1999. Financial Development and Reserve Requirements. Journal of Banking and Finance, 23, pp. 1031-1041.

33. Dickey, D. and Fuller, W.A., 1979. Distribution of the Estimates for Autoregressive Time Series with Unit Root, Journal of the American Statistical Association, 74 (June), pp. 427-31.

34. Dickey, D.A. and Fuller, W.A., 1979. Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American Statistical Society, 75, pp. 427–431.

35. Diks, C. and Panchenko, V., 2005. A Note on the Hiemstra-Jones Test for Granger Non-causality. Studies in Nonlinear Dynamics and Econometrics, 9, pp. 1-7.

36. Diks, C. and Panchenko V., 2006. A New Statistic and Practical Guidelines for Nonparametric Granger Causality Testing. Journal of Economic Dynamics and Control, 30, pp. 1647-1669.

37. Do, Q.T. and Levchenko A.A., 2004. Trade and Financial Development, World Bank Policy Research Working Paper, No. 3347.

38. Do, Q.T. and Levchenko, A.A., 2006. Comparative Advantage, Demand for External Finance and Financial Development. World Bank Policy Research Working Paper 3889, WPS 3889.

39. Doğan, H., 2008. Relationship Between Finance and Real Economy in Turkey: Was Schumpeter Right?. İktisat İşletme ve Finans, 23(272), pp. 49-79 (in Turkish).

40. Doğanlar, M. and Fisunoğlu, M., 1999. Causality Between Exports and Economic Growth in Asian Countries. Yapı Kredi Economic Review, 10(11), pp. 3-11.

41. Efron, B., 1997. Bootstrap Methods: Another Look at the Jackknife. Annals of Statistics, 7, pp.1-26.

42. Feder, G., 1982. On Export and Economic Growth. Journal Of Development Economics, 12, pp. 59-73.

43. Feeney, J., 1994. Goods and Asset Market Interdependence in a Risky World. International Economic Review 35, pp. 551-563.

44. Ghatak, S. Milner, C. and Utkulu, U., 1995. Trade Liberalisation and Endogenous Growth: Some Evidence for Turkey, Economics of Planning, 28(2-3), pp. 147-167.

45. Ginebri, S. Petrioli, G. and Sabani, L., 2001. Financial Deepening, Trade Openness and Growth: A Multivariate Cointegrated Analysis of the Complementary Effects, CIDEI Working Paper No. 62, Rome.

46. Greenaway, D. and Milner, C., 1993. Trade and Industrial Policy in Developing Countries: A Manual of Policy Analysis, London: Macmillan.

47. Greenwood, J. and Jovanovic, B., 1990. Financial Development, Growth and the Distribution of Income. Journal of Political Economy, 98(5), pp. 1076- 1107.

48. Gries, T. Kraft, M. and Meierrieks, D., 2009. Linkages Between Financial Deepening, Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa, World Development (37)12, pp. 1849-1860.

49. Grossman, G. M. and Helpman, E., 1991. Quality Ladders in the Theory of Growth, Review of Economic Studies, 58, pp. 43-61.

50. Grossman, G. M. and Helpman, E., 1992. Innovation and Growth in the Global Economy, Cambridge MA: MIT Press.

51. Hacker, R. S. and Hatemi-J, A., 2006, Tests for Causality Between Integrated Variables Using Asymptotic and Bootstrap Distributions: Theory and Application. Applied Economics, 38, pp. 1489-1500.

52. Halıcıoğlu, F., 2007. Financial Development and Economic Growth Nexus For Turkey. MPRA Paper No. 3566, (, 10.06.2009).

53. Hatemi-J, A. and Irandoust, M., 2000. Time-Series Evidence for Balassa’s Export-Led Growth Hypothesis. Journal of International Trade and Economic Development, 9(3), pp. 355-365.

54. Hermes, N., 1994. Financial Development and Economic Growth: A Survey of the Literature. Internationl Journal of Development Banking, 12(1), pp. 3-22.

55. Hiemstra, C. and Jones, J. D., 1994. Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation. Journal of Finance, 49(5), pp.1639–1664.

56. Huang, W., 2006. Emerging Markets Financial Openness and Financial Development. University of Bristol, Discussion Paper No. 06/588. Department of Accounting and Finance, University of Bristol. Bristol.

57. Huang, Y. and Temple, J., 2005. Does External Trade Promote Financial Development, University of Bristol, Discussion Paper, 05/575. Department of Economics, University of Bristol, Bristol.

58. Hur, J. Raj, M. and Riyanto, Y.E., 2006. Finance and Trade: A Cross-Country Empirical Analysis on the Impact of Financial Development and Asset Tangibility on International Trade. World Development 34(10), pp. 1728– 1741.

59. Jalil, A. Feridun, M. and Ma, Y., 2010. Finance-Growth Nexus in China Revisited: New Evidence from Principal Components and ARDL Bounds Tests, International Review of Economics and Finance 19, pp. 189–195.

60. Johnson, R.A., and D. W. Wichtern (1992). Applied Multivariate Statistical Analysis, Third Edition, Upper Saddle River, New Jersey: Prentice-Hall, Inc.

61. Kar, M. and Ağır, H., 2006. Capital Markets, Financial Development and Economic Growth: The Turkish Case. İstanbul Üniversitesi, Journal of the Faculty of Economics, 56(1), pp. 13-46 (in Turkish).

62. Kar, M. and Pentecost, E., 2000. The Direction of Causality Between Financial Development and Economic Growth in Turkey: Further Evidence. Economic Research Paper, Department of Economics, Loughborough University, No. 00/27. Loughborough.

63. Kar, M., O. Peker ve Kaplan, M., 2008. Trade Liberalization and Financial Development and Economic Growth in the Long Run: the Case of Turkey. South East European Journal of Economics and Business, 3(2), pp. 25-38.

64. King, R.G. and Levine, R., 1993. Finance and Growth: Schumpeter Might Be Right?. Quarterly Journal of Economics, 108(3), pp. 717-737.

65. Klein, M.W. and Olivei, G.P., 2008. Capital Account Liberalization, Financial Depth and Economic Growth. Journal of International Money and Finance, 27, pp. 861-875.

66. Kwiatkowski, D. Phillips, P.C.B. Schmidt, P. and Shin Y., 1992 Testing the Null of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?”, Journal of Econometrics, 54, pp. 159-178.

67. La Porta, R. Lopez-de-Silanes, F. and Shleifer, A., 2002. Government Ownership of Banks. Journal of Finance, 57(1), pp. 265-301.

68. La Porta, R. Lopez-de-Silanes, F., Shleifer, A. and Vishny, R.W., 1997. Legal Determinants of External Finance. Journal of Finance, 52, pp. 1131-1150.

69. Law, S. H. 2008. Does a Country’s Openness to Trade and Capital Flows Lead to Financial Development? Evidence from Malaysia. Asian Economic Journal, 22(2), pp. 161 – 177.

70. Law, S. H. 2009. Trade Openness, Capital Inflows and Financial Development in Developing Countries. International Economic Journal, 23(3), 409 – 426

71. Law, S.H. ve Demetriades, P., 2006. Opennes, Institutions and Financial Development. Wold Economy & Finance Research Programme Working Paper Series, WEF 0012, Economic & Social Research Council.

72. Lee, J., Strazicich, M.C., 2003. Minimum Lagrange multiplier unit root test with two structural breaks. The Review Economics and Statistics 85, 1082– 1089.

73. Levine, R., 1991. Stock Markets, Growth, and Tax Policy. The Journal of Finance; V(XLVI), pp. 1445-1465.

74. Levine, R., 1997. Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35, pp. 688-726.

75. Lütkepohl, H., 2004. “Vector autoregressive and vector error correction models” in Lütkepohl, H. and Kratzig, M. (eds.) Applied Time Series Econometrics, Cambridge University Press: Cambridge.

76. McKinnon, R.I., 1973. Money and Capital in Economic Development. Washington, D.C.: The Brooking Institution.

77. Montiel, P.J., 2003. Development of Financial Markets and Macroeconomic Policy. Journal of African Economies, 12(2), pp. ii12-ii52.

78. Nishimizu, M. and Robinson, A., 1986. “Productivity Growth in Manufacturing in Industrialisation and Growth: A Comparative Study” in H. Chenery, S. Robinson and M. Syrquin (eds.), Industrialisation and Growth, Oxford:Oxford University Press for World Bank.

79. Özmen, E. and Furtun, G., 1998. Export-Led Growth Hypothesis and the Turkish Data: An Empirical Investication. METU Studies in Development, 25(3), pp. 491–503.

80. Özmen, A, Özer, M. and Türkyılmaz, S., 1999. An Application Experience to the Causal Relations Between Export and Economic Growth. Dedication to Orhan Oğuz, Marmara University Press, No. 640, pp.379–392.

81. Öztürk, İ., 2008. Financial Development and Economic Growth: Evidence from Turkey. Applied Econometrics and International Development, 8(1), pp. 85-98

82. Patrick, H. T., 1966. Financial Development and Economic Growth in Underdeveloped Countries. Economic Development and Cultural Change, 14, pp. 174-189.

83. Pesaran, M. H. and Shin, Y., 1999. “An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis” in S. Strom (ed.), Econometrics and Economic Theory in the 20th Century, The Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge, pp. 371-413.

84. Pesaran, H. Shin, Y. and Smith, R.J., 2001. Bound Testing Approaches to the Analysis of Long Run Relationships. Journal of Applied Econometrics, 16(3), pp. 289-326.

85. Phillips, P.C.B. and Peron, P., 1988. Testing for a Unit Root in Time Series Regression. Biomètrika, 75(2), pp. 336-346.

86. Quah, D. and Rauch, J.E., 1990. Openness and the Rate of Economic Growth, Working Paper, University of California.

87. Rajan, R.G. and Zingales, L., 2003. The Great Reversals: The Politics of Financial Development in the Twentieth Centurt. Journal of Financial Economics, 69, pp. 5-50.

88. Redding, S., 1997. Dynamic Comparative Advantage and the Welfare Effects of Trade, Nuffield College Economics Discussion Paper, no. 140.

89. Renelt, D., 1991. Economic Growth: A Review of the theoretical and Empirical Literature, Working Papers WPS 678, Washington, D.C.: World Bank. 9

0. Renelt, D., 1991. Economic Growth: A Review of the theoretical and Empirical Literature. Working Papers WPS 678, Washington, D.C.: World Bank.

91. Romer, P.M., 1986. Increasing Returns And Long Run Growth. Journal Of Political Economy, 94(5), pp.1002-1037.

92. Saint-Paul, G., 1992. Technological Choice, Financial Markets and Economic Development. European Economic Review; 36(4), pp. 763-781.

93. Saci, K. and Holden, K., 2008. Evidence on Growth and Financial Development Using Principal Components, Applied Financial Economics, 18(19), pp. 1549 — 1560.

94. Schumpeter, J.A., 1912. The Theory of Economic Development, Cambridge: Harvard University Pres.

95. Shaw, E.S., 1973. Financial Deepening in Economic Development, New York: Oxford University Pres.

96. Şıklar, İ., 1992. Financial Development and Economic Growth in Turkey. Anadolu University Yearbook of Afyon Faculty of Economics and Administrative Sciences, pp.159-182 (in Turkish).

97. Şimşek, M., 2003. An Analysis of the Export-Led Growth Thypothesis with the Data of the Turkish Economy, 1960–2002. Dokuz Eylül University, Journal of the Faculty of Economics and Administrative Sciences,18(2), pp. 43–63 (in Turkish).

98. Svaleryd, H., Vlachos, J., 2002. Markets for Risk and Openness to Trade: How Are They Related? Journal of International Economics, 57, pp. 369-395.

99. Svaleyrd, H. and Vlachos, J., 2000. Does Financial Development Lead to Trade Liberalization?, Department of Economics, Research Papers in Economics, No:2000:11, Stockholm University.

100. Taşdemir, M., 2008. Estimating Monthly GDP for Turkey by State-Space Approach. International Research Journal of Finance and Economics, 17, pp. 144-151.

101. Taylor, M.S., 1994. Once-off and Continuing Gains From Trade, Review of Economic Studies, 61, pp. 589-601.

102. Toda, H.Y. and Yamamoto, T., 1995. Statistical Inference in Vector Autoregression with Possibly Integrated Processes. Journal of Econometrics, 66, pp.225–250.

103. Tuncer, İ., 2002. Export, Import and Growth in Turkey: Granger Causality Analysis with the Toda-Yamamoto Approach (1980–2000). Çukurova University Journal of the Institute of Social Sciences, 9(9), pp. 90– 106 (in Turkish).

104. Ünalmış, D., 2002. The Causality Between Financial Development and Economic Growth: The Case of Turkey. CBRT Research Department, Working Paper No: 3, Ankara. 25.01.2009.

105. Utkulu, U. and Kahyaoğlu, H., 2005. To What Direction Did Trade and Financial Opennesses Affect Growth in Turkey?, Turkish Economic Association Discussion Papers 2005/13 (in Turkish).

106. Yiğidim, A. and Köse, N., 1997. The Relationship Between Export and Economic Growth, the Effects of Import: The Turkish Case (1980–1996). Ekonomik Yaklaşım, 8(26), pp. 71-85.

107. Yücel, F., 2009. Causal Relationships Between Financial Development, Trade Openness and Economic Growth: The Case of Turkey. Journal of Social Sciences 5(1), pp. 33-42.

Kaynak Göster