Investment under financial liberalization : post 1980 Turkey case

In the history of the modern state of Turkey many policies have been developed and applied in order to transform ineffective economy to a dynamic and steady one. The liberal policies have been effectively applied except for war periods. The main activity of liberal policies in Turkey's economy was conducted on January 24, 1980 with some important structural adjustment decisions. These decisions aimed to integrate the economy with the global system by applying global economic order that widely adopted all over the world. The decisions aimed also to activate a financial liberalization in the country. Financial liberalization generally includes the principles related to removing the pressure on the interest rate, currency control and investment mobility. More liberalization steps came in 1989 aiming to increase the investment and growth. Foreign Direct Investment (FDI) was seen important for those purposes. However, short term capital flows, having been more effective in real investments than FDI, have led to several negative effects in this period. In this study some of the drawbacks of that process of financial liberalization have been discussed. The relation between FDI and Gross Domestic Product in the financial liberalization process has been tested with econometric implementation. Econometric estimation has been applied for this purpose to test this relationship for post 1980 era for Turkey as a developing country.