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The Determinants of Private Fixed Investment and the Relationship between Public and Private Capital Accumulation in Turkey

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  • Krishna Rao Akkina

    (Department of Economics, Kansas State University, Manhattan, Kansas, USA.)

  • Mehmet Ali Celebi

    (Department of Economics, Kansas State University, Manhattan, Kansas, USA.)

Abstract
The purpose of this study is to analyse the determinants of private fixed investment spending in Turkey over the period 1970–96, which covers years of both financial repression and financial liberalisation. A reformulated neoclassical investment model and a reformulated flexible accelerator investment model have been tested for the Turkish economy. The results obtained support the accelerator principle and the crowding out hypothesis, that is, public and private sector investments have been found to be substitutes. Furthermore, the hypothesis that the volume of funds is as important as the cost of funds used in financing private fixed investment has been verified. On the other hand, the so-called McKinnon-Shaw hypothesis has not been completely verified because the effect of the medium-term real lending rate on private fixed investment has been found to be negative but statistically insignificant. Finally, the financial and liberalisation programmes that have been implemented since 1983 have not yet shown any noticeable positive effects on private investment.

Suggested Citation

  • Krishna Rao Akkina & Mehmet Ali Celebi, 2002. "The Determinants of Private Fixed Investment and the Relationship between Public and Private Capital Accumulation in Turkey," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(3), pages 243-254.
    • Handle: RePEc:pid:journl:v:41:y:2002:i:3:p:243-254
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    References listed on IDEAS

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    1. Mario I. Blejer & Mohsin S. Khan, 1984. "Government Policy and Private Investment in Developing Countries (Politique des pouvoirs publics et investissement privé dans les pays en développement) (Política estatal e inversión privada en lo," IMF Staff Papers, Palgrave Macmillan, vol. 31(2), pages 379-403, June.
    2. Chhibber, Ajay & van Wijnbergen, Sweder, 1988. "Public policy and private investment in Turkey," Policy Research Working Paper Series 120, The World Bank.
    3. Serven, Luis & Solimano, Andres, 1992. "Private Investment and Macroeconomic Adjustment: A Survey," The World Bank Research Observer, World Bank, vol. 7(1), pages 95-114, January.
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    4. Shabbar, Shagufta & Ahmed, Qazi Masood & Pasha, Farooq, 2018. "A juxtaposition of Tax Expenditures and Direct Expenditures: Case Study of Pakistan," MPRA Paper 117419, University Library of Munich, Germany, revised 2018.
    5. Twine, Edgar E. & Kiiza, Barnabas & Bashaasha, Bernard, 2015. "The Flexible Accelerator Model of Investment: An Application to Ugandan Tea- Processing Firms," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 10(1), pages 1-15, March.
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    12. Khadija Essalhi & Salah Eddine, 2023. "The Impact of Monetary Policy on Private Investment in Morocco: An Analysis Using a VECM Model [L'impact de la politique monétaire sur l'investissement privé au Maroc : une analyse à l'aide d'un mo," Post-Print hal-04303914, HAL.
    13. Mr. Olaf Unteroberdoerster & Roberto Guimarães-Filho, 2006. "What’s Driving Private Investment in Malaysia? Aggregate Trends and Firm-Level Evidence," IMF Working Papers 2006/190, International Monetary Fund.
    14. Imtiaz Ahmed & Abdul Qayyum, 2007. "Do Public Expenditure and Macroeconomic Uncertainty Matter to Private Investment? Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(2), pages 145-161.
    15. Ahmad, Imtiaz & Qayyum, Abdul, 2009. "Role of Public Expenditures and Macroeconomic Uncertainty in Determining Private Investment in Large Scale Manufacturing Sector of Pakistan," MPRA Paper 29268, University Library of Munich, Germany.
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