Turkish economic development in comparative perspective

The first part of my essay investigates the institutions-growth relationship while analyzing the role of EU membership process, as a supranational anchor to further improving institutional quality. I conduct a comparative analysis of Turkey, Poland and Spain and examine this issue in two steps: effects of EU membership process on institutional quality and effects of institutions on growth. Effects of EU membership process on institutional quality are evaluated with structural break analyses and time trend analyses. Institutions-growth relationship is examined by employing Autoregressive Distributed Lag (ARDL) approach. As a result of my tests and estimations, while I find no significant evidence that EU membership process improves institutional quality, I find significant evidence that institutions matter for growth. The second part of my essay examines Turkish economic history (1923-1995) while providing a brief review of the Ottoman economic history. The Ottoman economic history is reviewed in order to ensure a better understanding of the Ottoman heritage that was taken over by the Turkish Republic. Institutional environments within which economic events took place and educational polices undertaken are also briefly documented. The paper highlights that while economic policies undertaken evolved in time (from protectionist and etatist directions to liberal policies) the arbitrary policy making, mostly characterized by an absence of a long run perspective inhibited the way to stable and sustainable economic growth. The third and final part of my essay addresses financial linkages between Turkey/Poland and Europe. I use a vector error-correction vector autoregression (ECM-VAR) analysis to investigate block-exogeneity assumption between Turkey/Poland, Germany (representing Europe) and United States (representing rest of the world). Results show that there is unidirectional causality from European short rates to Turkish rates. The evidence is weaker with long rates. Tests results with Polish rates do not support European asymmetry.