Economic fluctuations according to heterodox business cycle theories: Analysis of the Turkish economy within the framework of complexity and system thinking

One of the research areas of macroeconomics theory is business cycles. In this thesis, orthodox and heterodox business cycle theories in the macroeconomics literature are examined comparatively. The first model discussed in the thesis is a dynamic stochastic general equilibrium model based on the assumptions of New Keynesian Business Cycle Theory from mainstream theories. The model, which represents a small economy that is open to the outside, is estimated by the system dynamics method for the period between 2008:Q1-2019:Q4. According to the findings revealed by the model, the monetary authority follows a monetary policy that prefers price stability to output gap for the period in question. The output gap reacts more to any interest rate shock than to price stability. The second model that the thesis deals with is a system dynamics model based on the assumptions of the "Minsky Financial Instability Hypothesis", the foundations of which were laid by Hyman P. Minsky, one of the heterodox economists affiliated with Post-Keynesian economic theory. This model is an oscillation model created by the system dynamics method using the data of the period between 2010:Q1-2021:Q3. The basic assumption of the model is that the fluctuation of economic activity around the trend is a natural phenomenon due to the reasons arising from the basic characteristics of modern capitalist market economies. The model created based on Post-Keynesian Business Cycle Theory assumptions; determines the type of financing in current economic activity which is reliable, speculative or Ponzi type financing by following the risk perception, public debt composition and debt maturities. Accordingly, the model simulates the frequency and amplitude of business cycles around the trend according to the improvement or deterioration in the quality of financing under the current risk perception in the economic system for the future, based on historical real data. According to the findings of the model, the frequency and amplitude of business cycle oscillations around the trend in the Turkish Economy are influenced by risk perception, financing quality and maturities.