Impacts of financial sector components on the real sector: An analysis for Turkey

From the past to the present, the wheel of economy has never stopped turning. As a result of countless wars, migrations, crises and changes, there are economic schools and policies that have marked every period. It has been understood that capitalism creates numerous problems due to the nature of capitalism in the system where economic actors are rational and active in the markets where economic activities are constantly functioning. In addition to the real market, the existence of financial markets and their impact on the economic system has brought the concept of financial stability to the literature. However, in addition to environmental and economic sustainability in a changing and developing world, financial sustainability has become necessary for the long-term and smooth functioning of the economic system like a wheel. The financial instability hypothesis of Minsky, an important representative of the Post Keynesian School, deals with the conditions for the emergence of financial instability and policy recommendations for an unstable economy. This study analyzes whether the assumptions of the Financial Stability Hypothesis, which Hyman P. Minsky introduced to the economic literature, are valid for the Turkish economy. As a secondary objective, the study questioned the impact of financial stability on the real sector for the Turkish economy. In this context, questioning and discussing the concepts necessary for the stabilization and sustainability of financial and real markets has been an important motivation of the study. As a result of the findings of the study, the disruptions in financial markets and the unsustainable level of private sector indebtedness have had a negative impact on real markets, especially by increasing unemployment in the long run, leading to a loss of economic welfare.