Causality relationship between trade and financial openness ratio and economic growth: The case of Turkey

The effects of trade liberalization and financial liberalization on economic growth are constantly discussed, and empirical analyzes are made on them. However, since different results were obtained in empirical studies using different data and different methods in different countries, no consensus was reached. In this study, the effect of the ratio of commercial and financial openness on economic growth was examined econometrically by using a quarterly data set covering the period of 1998Q1-2016Q4 for Turkey and the role of commercial and financial openness in Turkey on economic growth was investigated. In the study, first, the Augmented Dickey-Fuller and Philips-Perron conventional unit root tests and the Lee-Strazicich unit root test, taking structural breaks in the series into account, were applied to determine the stationary levels of the series to be used. As a result of the unit root tests, the Granger causality test, effect-response analysis and variance decomposition analysis were performed to reveal the relationships between the variables. The results show that there is a one-way causality relation to economic growth rate from trade openness. According to these results, the changes in the rate of commercial openness in Turkey affect the economic growth rate.