Analysis of the relationship between financial liberalization and economic growth in Turkey's economyduring the 2000-2017 time period

The effects of financial liberalization along with globalization have become an important issue for developed countries as well as developing countries. Most importantly, the effects of financial liberalization on economic growth have become a remarkable issue in recent years. Turkey's economy has experienced significant changes after 1980 when financial liberalization began. To ensure financial liberalization which causes these changes, they are the policies for the liberalization of the interest, exchange rate and capital movements which are put into practice. As a result of the policies implemented in the financial liberalization process, in some years, high growth rates were reached, but in some years, financial crises were faced due to the liberalization of capital movements. In this study, the effects of financial liberalization on economic growth are tried to be put forward in a theoretical and empirical way. The impact of financial liberalization on economic growth has been investigated with the aid of time-series analysis by using the 2000Q1-2017Q4 quarterly data for Turkey's economy. Whether there is a meaningful relationship between financial liberalization and economic growth and the direction of this relationship has been tried to be tested primarily with the VAR (Vector Autoregressive) model. Afterwards, the usability of the effective variable was determined by means of impact-response analysis and the impact level was determined by means of variance decomposition analysis. Then, the Granger Causality Test was applied to the causality dimension of the relationship between economic growth and financial liberalization in the short term. According to the results obtained from our study, there is a one-way relationship between financial liberalization and economic growth in Turkey. The direction of this relationship is from economic growth to financial liberalization according to the results of the Granger causality test. Finally, the results which support the view known as the "demand-side hypothesis" have been reached.