Turkey’s Economy from different perspectives after 1980

The past, present and the future

by Ebru Gül Yilmaz (Volume editor) Neyir Tekeli (Volume editor)
©2020 Edited Collection 282 Pages


Turkey has a crucial change in terms of economic infrastructure after the decision of opening up the economy at 1980. Following import substituting industrialization strategy ended with an economic crisis at the end of 1970s. With the beginning of 1980s in January a very radical economic program has announced that brought economic liberalization. After economic liberalization each economic dynamic has changed as never going to be the same again especially after opening up the capital account completely at 1989. The aim of this book is to share the academic research outputs and the field experiences on Turkey’s economy for the related period with contributors from different backgrounds and different perspectives.
The contributors to this book with their both academic and field experience provide a broad scanning understanding of the Turkey’s Economy after 1980’s and also expand the readers horizon on having a better understanding of expectations for the future. We appreciate them for becoming a team and we sincerely thank each of them for sharing their experience and expertise. Ebru Gül Yılmaz Editor

Table Of Contents

  • Cover
  • Title Page
  • Copyright Page
  • The Editors
  • Preface
  • About the book
  • Citability of the eBook
  • Contents
  • Notes on Contributors
  • Monetary Policy in Turkey from 1980 to Present “Maintaining Price Stability and Financial Stability”
  • De-industrialization in Turkey
  • Closing the Loops: Business Model Approaches for Circular Economy
  • Foreign Trade After the 1980s and Effects of Digitalization on Foreign Trade
  • Innovation and Technology from Marketing Perspective (from the 1980s to 2000s) with a Case Study on Turkish Women Entrepreneurs on Agricultural Cooperatives
  • Turkey’s Asset Management Companies and Projections for the Sector
  • Turkish Insurance Market
  • Crisis and Development of Financial Markets in Turkey After 1980
  • Review on the Development of Tourism Sector in Turkey Before 80S, 80S and Tourism Law: 2634
  • An Assessment of the Relationship Between Economic Freedom and Income Inequality for Turkey
  • International Tourism and the Importance of Tourism in the Turkish Economy (2008–2019)
  • The Effects of Employment in Turkey Tourism Investment
  • “Examination of Turkey’s Employment Diversities Between the Years 2004 and 2018 Based on Region Using Classification and Regression Trees (CART) Method”
  • List of Figures
  • List of Tables

Notes on Contributors

Cengiz Doğru is Assistant Prof. in the Department of Finance and Banking at Nişantaşı University, Turkey. He also gives lectures at İstanbul Bilgi University as a part-time lecturer. He was a former Sworn in-Banks Auditor at the Turkish Treasury and former Bank Board Member at various banks in Turkey, Cyprus, and the Netherlands. His research and interest areas are financial markets, risk management, financialization, and corporate governance.

Çiğdem Boz, born in 1978, is Associate Professor of macroeconomics in the Department of International Trade at Istanbul Gelisim University, Turkey. She is also interested in history of economic thought and political economy. As a founder of the theater of economic thought, she has recently directed a documentary about the Turkish economy.

Damla Özekan is Assistant Prof. in the Department of International Trade at Istanbul Gelisim University, Turkey. She also gives lectures in MBA at Isik University. Her studying areas include international economics, international trade, sustainable development, circular economy, and economical and political aspects of energy and environment. She is working as a consultant and trainer to the municipalities and companies in the field of climate action planning and sustainability leadership.

Ebru Gül Yılmaz is Assistant Prof. in the Department of International Trade at Istanbul Gelisim University, Turkey. She is also vice dean of Faculty of Economics, Administrative and Social Sciences. Her areas of research are digitalization, international trade, and macroeconomics. She also has 22 years of experience in banking sector as senior auditor, branch manager, senior department manager, and head of banking operations.

Evrim Ildem Develi is a part-time Assistant Prof. in the Institute of Social Sciences of Işık University. She is also giving consultancy to firms and teaching at training programmes for SMEs. Her studying areas include marketing, e-commerce, business administration, international marketing, and innovation management in firms.

Furkan Evranos is Assistant Prof. in the Department of Banking and Finance at Beykent University, Turkey. He is one of the founders of Cogito Park & Co ←13 | 14→Investments Group and currently a Board Member and General Manager at Cogito Park & Co FT Institute and Cogito Park & Co Technology Development.

Hakan Özcan is Assistant Prof. in the Department of International Finance at Istanbul Okan University, Turkey. His areas of research are digitalization, international finance, and insurance.

Hazar Dördüncü is Assistant Prof. in the Department of International Trade and Logistics at Nişantaşı University, Turkey. He is also Vice Dean of Faculty of Economics, Administrative and Social Sciences and director of the School Applied Sciences. His areas of research are international trade, logistics, and aviation management.

H. Neyir Tekeli is Assistant Prof. Dr. in Istanbul Kültür University, Turkey. She is also head of Ground Handling Services Management Department. Her areas of research are tourism, tourism management, and tourism economics.

Onur Özdemir is Assistant Prof. in the Department of International Trade (English) at Istanbul Gelisim University, Turkey. He is currently working on income distribution, inequality, financialization, economic growth, and heterodox economics.

Sezgi Gedik is a research assistant in the Department of Tourism and Hotel Management at Istanbul University-Cerrahpasa, Turkey. Her areas of research are tourism economy, environment, and cultural heritage.

Suna Muğan Ertuğral is Assistant Prof. in the Department of Economic Development and International Economics at Istanbul University, Turkey. Her areas of research are tourism economics, sustainable tourism, employment relations, and macroeconomics.

Yeliz Sevimli Saitoğlu, PhD, is the head of Banking and Insurance Department at Istanbul Kültür University, Turkey. Her research and interest areas are statistics, biostatistics, decision trees, probability, and quantitative methods.

Assist. Prof. Dr. Cengiz Doğru

Monetary Policy in Turkey from 1980 to Present “Maintaining Price Stability and Financial Stability”

Abstract: In this chapter, Turkey’s monetary policy applications as well as the results of these policies between 1980 and 2018 will be analyzed. These periods will be examined according to the alignment with monetary policy conversions about implementations, tactics, and strategies. Since the monetary policy instruments, mostly focused on solving the existing problems and responding to crises, both problems and monetary policies applied for precautionary measures are chronologically evaluated together. In addition the recent monetary policies have been studied as a separate in subheadings.

Keywords: Monetary Policy, Financial Stability, Financial Crises, Inflation Targeting, Monetary Transmission Mechanism

1 Introduction

Keynesian thought has become popular and very dominant all over the World since the Bretton Woods Conference in 1944. However, it was softened and then mostly abandoned in the late 1970s. During this period, a number of governments designed their economic policies according to the Keynesian thought and principles.

After the 1980s, ideas of globalization, financial liberalization, and privatization have risen. It was unprecedented that many governments have adopted detailed and strict privatization programs in their countries such as the USA, the UK, France, Germany, Mexico, and Turkey.

Moreover, financialization has begun to threaten national economy policies as well as economic actors of the whole economy. Financialization has forced governments, legal entities, and other members of the society to use more financial instruments. Not only governmental institutions and companies but also households become important customers of banks by using various financial products from basic payment instruments such as credit cards to complex synthetic financial derivatives and securities.

It is obvious that Turkey was affected by the mentioned changes in specified periods. Furthermore, Turkey was one of the countries hit hard by the various crises. Thus the country has faced a large number of financial crises which were ←15 | 16→called time to time as currency crises, debt crises, liquidity crises, and banking crises between 1980 and 2018.

The Central Bank of Turkey has designed and implemented such monetary policies appropriate to the economical needs and change of the World under the concepts of globalization, financial liberalization, financial deepening, and financialization concepts in accordance with the Turkish Government’s monetary and fiscal policy.

Monetary policy tools used by central banks are open market operations, discount lending, and reserve requirements. Many central banks design and implement their monetary policies around these instruments.

2 Decisive Monetary Policy Periods of Turkey

In this section, important developments affecting the monetary policy will be classified and explained in chronological order in order to cover the significant changes and developments in which they are involved.

2.1 Pre-1980 Period Monetary Policies

Although the subject of this book is defined as post-1980 economic developments, in order to evaluate the post-1980 developments and the macroeconomic framework, the analysis of the previous periods is important at this stage. Therefore, the key developments affecting the monetary policy in the pre-1980 period are summarized below.

2.1.1 Establishment of the Republic Central Bank of Turkey

The Central Bank of Turkey (hereinafter referred to as the Central Bank) started to operate as the national Central Bank of the young Turkish Republic in 1930. The Central Bank has been defined as an independent and autonomous body, and these peculiarities were emphasized on its establishment law and its shareholders’ agreement. Besides, Central Bank’s primary objective is defined to support the economic development of the country. According to the founding act, Central Bank is granted with the exclusive privilege of issuing banknotes in Turkey.

Furthermore, the Bank was also authorized to set rediscount rates, to regulate the money market transactions and the circulation of TL, to execute Treasury operations, and to take all necessary measures for the sake of safeguarding the value of the Turkish currency. Central Bank also was assigned as the treasurer of the Government (CBRT, 2018a).

←16 |

In the 1930s, the Government was the unique authority to set exchange rates under the fixed exchange rate regime in force at that time. Since the main payment instruments in the country were checks and promissory notes other than money, the Central Bank used the rediscount rates mechanism effectively as the main monetary policy tool. In contrast to developments in the World, the 1930s were a period of low inflation in the country.

2.1.2 World War II and Its Implications

Despite not participating in the war, Turkey was affected by the negative conditions of World War II in the 1940s. Under these adverse conditions, the Government used the Central Bank resources for financing budget deficits and other public finance needs instead of using these resources for implementing independent monetary policy. For this reason, economic and fiscal conditions deteriorated between 1938 and 1948.

The Central Bank implemented a monetary policy for achieving growth and rapid development as a target in the 1950s. Hence the Government began to finance economic growth with Central Bank resources. In line with these targets, the Central Bank provided short-term advances to the Treasury for the first time in its history.

2.1.3 The Importance of the State Planning Organization on Monetary Policies

Turkey adopted the planned economy in the 1960s. In the same year, the Undersecretariat of State Planning Organization (SPO) was founded and started to prepare five-year development plans for the country. These plans were covering all aspects of the economical targets such as monetary policy, fiscal policy, growth, employment, inflation rates, etc.

Besides, these plans were mandatory to be implemented for the public sector. However, plans were encouraging for the private sector with its special stimulation and bolstering programs. The Government carried out economic and industrial developments in the country with the help of these plans. Under these circumstances, the Central Bank implemented expansionary monetary policies and perpetually continued to bolster the Government budget’s financing needs as the Government’s sole treasurer in order to reach planned targets.

Meanwhile, the control mechanisms of the fixed exchange rate regime were gradually transferred to the Central Bank. It was started to regulate this subject with its circulars and communiques such as Communique on the Protection of the Value of Turkish Money and Capital Movements Circular.

←17 |

The new Central Bank Act (No: 1211) was accepted in 1970 by the Parliament with introducing new concepts for efficient central banking. With this new act, the Central Bank increased its power on monetary policy instruments. In addition, the new law brought a compulsory rule that the Government should ask the opinion of the bank about money and credit-related applications and implementations.

Moreover, the Central Bank was authorized to conduct open market operations to regulate money supply and liquidity according to financial markets’ needs like the other pioneer central banks such as Federal Reserve Bank of the United States and the Bank of England of the UK. The Central Bank also was permitted to grant medium-term loans for the purpose of supporting investments and economic development. The amount of advances available to the Treasury was raised to 15 percent of the budget appropriation for the related year. During these years, the collaboration of the Central Bank and the State Planning Organization was a very important element for achieving targets of the monetary policy.

2.2 Monetary Policies of the 1980–1990 Period

In this specified decade, there have been important changes in monetary policy practices in Turkey due to experiencing some significant development such as 24 January 1980 Decisions, September 12 Military Coup, and bankers’ bankruptcy scandal. In this case, the Government and the Central Bank responded to these negative developments with new monetary policy practices.

2.2.1 Decisions of 24 January 1980

In the early 1980s, the financial liberalization thoughts were becoming more significant throughout the World. Simultaneously, there were unprecedented changes in the Turkish economy in the 1980s.

The Government announced the structural conversion decisions on the economy which was called the Decisions of 24 January 1980. The impact of these decisions affected the whole national economy for almost four decades, still continuing to do so.

The Government has decided to adopt free market economy in light of these decisions. Therefore, floor and ceiling price applications were abandoned for achieving financial liberalization process under the concept of free market conditions. Besides, foreign trade regulations were amended to provide more liberal and competitive currency and investment environment.

The 24 January 1980 Decisions were taken by the Ministers’ Council dated 24 January 1980 and entered into force. The outlines of these decisions are briefly as follows (Tuleykan and Bayramoğlu, 2016):←18 | 19→

TL was devalued, and simultaneously the foreign exchange regime was rearranged according to new policies.

The flexible foreign exchange regime was accepted instead of fixed exchange regime and then the Turkish lira was allowed to fluctuate against foreign currencies.

The Central Bank was authorized to manage national gold and foreign exchange reserves of the country.

The Central Bank was also authorized to use all policy tools in order to get price stability. Therefore price stability became the main target for the Central Bank.


ISBN (Softcover)
Publication date
2020 (March)
Economic liberalization foreign trade tourism macro economy labor economics
Berlin, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2020. 282 pp., 41 fig. b/w, 43 tables.

Biographical notes

Ebru Gül Yilmaz (Volume editor) Neyir Tekeli (Volume editor)

This collection of assets aims to review Turkey’s economy from different perspectives by focusing on the period after 1980s, present and the future. Each section focuses on different parts of the full economic picture; such as innovation on economy, deindustrialization, circular economy, tourism, monetary policies, financial sector effects on economy, foreign trade, digitalization effects on economy, labor force, income inequality and insurance sector effects.


Title: Turkey’s Economy from different perspectives after 1980
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284 pages