The Private Sector’s Response to Financial Liberalization in Turkey: 1980–82

Abstract

In mid-1980, economic policy makers in Turkey initiated attempts to restructure and deregulate the financial sector. The main steps taken were the removal of legal restrictions on interest rates and the allowance and encouragement of trades through new types of financial institutions and instruments. An important aspect of the deregulation attempts was that they were implemented simultaneously with and, indeed, as part of, a comprehensive stabilization/liberalization program.

The views expressed in this paper are those of the author and do not necessarily represent the views and policies of the World Bank or of its executive directors or the countries they represent. This paper is a product of my dissertation work. I am grateful to Charles A. Wilson, my advisor, and, Tosun Arıcanlı, Ishac Diwan and Dani Rodrik for helpful comments and encouragement. The paper benefited greatly from discussions in the conference on ‘The Political Economy of Turkey in the 1980s’, especially from comments by Ataman Aksoy, Tercan Baysan and Merih Celâsun. I thank research teams at the Capital Markets Board and the Central Bank of Turkey for their help and support in obtaining the data. Financial support from Uluslararası Endüstri ve Ticaret Bankasi, 100. Yıl Fonu and the Institute for the Study of World Politics is gratefully acknowledged. All errors and omissions are mine.