The effects of financial liberalisation on the consumption expenditure: The case of Turkey

Financial liberalization impacts on all economies, firstly developed economies, as from late 1980s. Financial liberalization that is based on the hypothesis of McKinnon-Shaw is described as liberalization of capital flows. With regard to the hypothesis, financial liberalization policies cause that savings and investments increase and that efficiency and growth realize. International capital flows that become foreign savings for a developing economy accelerate the process of financial liberalization because of the fact that domestic savings are inadequate for developing. In Turkish economy, the obstacles against capital flows has been removed by way of a regulation in 1989, because of both the great transformation in its economic structure as from 24th January 1980 and macroeconomic instabilities. After this date some economic crises and instabilities are experienced in respect of international capital flows into Turkish economy that expects to meet domestic saving inadequateness with foreign capital.In this study, We aim to analyze the effect of financial liberalization on consumer expenditure that in Turkish economy which the obstacles against foreign capital flows has been removed within financial liberalization in 1989. According to the results of analyses financial liberalization has decreased the national saving especially after 2000 whereas it has increased consumer expenditure with several mechanism on Turkish economy.