Analyses of the financial liberalization and leading crisis indicators

The world economy in the globalization process has experienced many crisis which have different causes and effected areas. Especially, the increasing crisis in the 1900s has been brought by studies to identify leading indicators of crisis. Increased crises has also led to questioning the concept of financial liberalization whose theoretical foundation has been created by McKinnon and Shaw. In this study, after discussing the theoretical literature on financial liberalization, attention will be drawn to the increasing crisis in the process of financial liberalization after 1980 in parallel with the structural transformation taking place in Turkey's economy. For this, 1994, 2000-2001 and 2008 crisis in Turkey will be observed. In the econometric analysis section, the selected financial liberalization and leading crisis indicators which is inspired by the work of Kaminsky, Lizondo and Reinhart known as KLR approach will be analyzed. For Turkey's economy, the completion of the financial liberalization process in the time interval after 1989, the effects of shock, causality relationship and interact with each of these indicators will be surveyed through the VAR model and Toda-Yamamoto test. The purpose of this study to show that financial liberalization indicators of hot money movements, real interest rates and credit growth triggered the crisis which were experienced in Turkey after 1989 by adversely affecting the leading crisis indicators. In addition to this purpose, the most effective indicators of financial liberalization on leading crisis indicators will be determined for Turkey's economy. According to VAR model and Toda-Yamamoto causality test, the negative impact on the leading crisis indicators, description of these indicators percentage and the causality relationship of hot money movements and real interest rates are more than the credit growth. Keywords: Financial liberalization, Leading crisis indicators, KLR approach, VAR model, Toda-Yamamoto causality test.