Financial Openness, Trade Openness and Economic Growth: An Empirical Application on Turkey

The existing relationship between financial openness and economic growth is significant for a healthy

analysis of country economies. In this study, it is aimed to investigate the relationship between Turkey's

financial openness and economic growth by using annual data from 1985 to 2018. In the study, Turkey's

data from 1985 to 2018 were used. The variables used are economic growth (GDP), financial openness

(FA) and trade openness (DA). All variables are handled in terms of current ($). Here, the natural

logarithm of GDP, FA and DA variables is taken and included in the model. In the study, firstly, the

stationarities of the variables were determined by Carrion-i-Silvestre et al. (2009) analyzed with unit root

tests. Maki (2012) cointegration test, which allows multiple structural breaks, was used after it was

determined that the variables were stationary at the I(1) level. Causality analysis between variables was

tested with Hacker & Hatemi (2006) bootstrap causality test. When the structural break dates are

examined, it has been determined that the economic crises in 1994, 1998 and 2001 in Turkey and the

global economic crises that started in 2007 and intensified in 2008 caused structural breaks by deeply

affecting the Turkish economy. By determining the cointegration relationship between the variables, it

was found that they would act together in the long run. In addition, a bidirectional causality relationship

was found between financial openness and economic growth. In the light of these findings, it was

concluded that policy makers should focus more on financial openness when they develop policies for

economic growth.