The Impacts of Financial Development on Growth : A Time-Varying Causality Analysis for Turkey

The goal of this research is to determine whether the causal relationship between financial development and economic growth in Turkey is stable over time. For this purpose, causal relationship between financial development and economic growth in Turkey has been investigated by means of annual data for the period of 1960-2013. Differently from previous studies in the literature, considering that causal relationship between financial development and economic growth might change depending on time, time-varying causality test developed by Balcilar, Ozdemir and Arslanturk (2010) has been used. The results show that there is a unidirectional causal relationship from financial development to economic growth and this relationship changes depending on time. It is seen that unidirectional causality from financial development to economic growth emerged during the periods of financial turmoil and political crisis. The basic conclusion is that there is no stable causal relationship between financial development and economic growth in Turkey over the given time period