Abstract
It is widely held that the Turkish financial system during the years before 1980 was highly repressed. The financial repression consisted of: ceilings on deposit and lending rates and negative real interest rates; credit rationing and subsidized credits to priority sectors; excessive taxation of financial incomes and transactions; high liquidity and reserve requirements and intermediation costs; a high degree of interlocking ownership between banks and non-financial corporations; excessive reliance of corporations on credits rather than equity finance and direct security issues, and low-quality bank portfolios; undeveloped capital markets; excessive reliance of the public sector on Central Bank for deficit financing; entry barriers to foreign banks; restrictions on external financial operations, foreign asset holdings and so on. These are widely believed to have resulted in inefficiencies and distortions in resource allocation, with adverse effects on growth.2
No Honour now could be content,
To live and owe for what was spent,
Liv’ries in Broker’s shops are hung;
They part with Coaches for a song;
Sell stately Horses by whole sets;
And Country-Houses to pay debts.
Mandeville, Fable of the Bees
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© 1990 Tosun Arıcanlı and Dani Rodrik
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Akyüz, Y. (1990). Financial System and Policies in Turkey in the 1980s. In: The Political Economy of Turkey. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11274-6_6
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