Economic Growth In Turkey


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Economic Growth In Turkey

  1. 1. ECONOMIC GROWTH IN TURKEY 22/02/10 Instructror: Arzu ALVAN
  2. 2. ECONOMIC GROWTH IN TURKEY <ul><li>MAIN ISSUES TO BE ANALYSED: </li></ul><ul><li>GDP, GDP/Capita, </li></ul><ul><li>Growth rate of GDP and GDP/capita </li></ul><ul><li>Nominal GDP, Real GDP, </li></ul><ul><li>Doubling time </li></ul><ul><li>Effect of Population growth on economic growth </li></ul><ul><li>Basic growth accounting methods </li></ul><ul><li>Growth indicators in Turkey </li></ul><ul><li>GNP, GNP/Capita tables in Turkey </li></ul>22/02/10 Instructror: Arzu ALVAN
  3. 3. WHAT IS ECONOMIC GROWTH? <ul><li>In every economy one of the main objectives of the governments is to achieve stable and sustainable economic growth. Therefore, one of the most critical issues is to analyse and research the sources and outcomes of economic growth. </li></ul><ul><li>One of the basic source to measure the economic growth of a country is to measure the growth in GDP per capita </li></ul><ul><li>GDP: A measure of all of the goods and services produced in a country in a year. </li></ul><ul><li>GDP/Capita: GDP per person: GDP/population </li></ul>22/02/10 Instructror: Arzu ALVAN
  4. 4. WHAT IS ECONOMIC GROWTH?(CONT’D) <ul><li>Nominal GDP: GDP at current year prices </li></ul><ul><li>Real GDP: GDP at constant year’s prices. </li></ul><ul><li>GDP Deflator: (Nominal GDP / Real GDP) * 100 </li></ul><ul><li>Doubling time of GDP= 72 / g </li></ul><ul><li>Example: If g = 5% for a country. It will be doubled after 14,4 years. </li></ul><ul><li>Doubling time = 72/ 5 = 14,4 years </li></ul>22/02/10 Instructror: Arzu ALVAN
  5. 5. GROWTH RATE <ul><li>Growth rate of GDP: g can be measured as: </li></ul><ul><li>Where: </li></ul><ul><li>g = growth rate </li></ul><ul><li>GDP= Gross Domestic Product </li></ul>22/02/10 Instructror: Arzu ALVAN
  6. 6. GROWTH RATE (CONT’D) <ul><li>Example: If Nominal GDP at 2000= 125,595,631,196 YTL and </li></ul><ul><li>Nominal GDP at 2001= 176,483,848,227 YTL </li></ul><ul><li>Then growth rate of GDP between 2000 and 2001 is: </li></ul><ul><li>g= 40% </li></ul>22/02/10 Instructror: Arzu ALVAN
  7. 7. GROWTH RATE (CONT’D) <ul><li>Real growth rate: Real GDP at 2000 (2005 prices) = 405,072,919,840 YTL. And Real GDP at 2001 (2005 prices)= 366,447,110,380 YTL. </li></ul><ul><li>g = (-) 9% </li></ul>22/02/10 Instructror: Arzu ALVAN
  8. 8. POPULATION AND ECONOMIC GROWTH <ul><li>Changes in population affect both the consumption needs of an economy and the productive capacity of the economy. </li></ul><ul><li>In per capita terms, more people will result in less of everything else. </li></ul><ul><li>A country with a lot of people relative to the amount of resources will be poorer. </li></ul><ul><li>Hence, GDP/capita decreases when population growth rate is greater than GDP growth rate </li></ul>22/02/10 Instructror: Arzu ALVAN
  9. 9. SOURCES OF GROWTH <ul><li>According to last researches about the sources of growth, one of the main sources of growth is productivity of the inputs and Total Factor Productivity (TFP). </li></ul><ul><li>Serious studies on investigating the sources of growth starts with Jan Tinbergen . </li></ul><ul><li>Tinbergen’s procedure deals with attributing output growth to increase in inputs and Total Factor Productivity (TFP) and based on the theory of production. This methodology is further detailed by Robert Solow. </li></ul><ul><li>Recently, Arnold Harberger initiated a new growth accounting methodology, Two-Deflator Growth Accounting (TDA) based on the theory of capital, and no specific production function. </li></ul>22/02/10 Instructror: Arzu ALVAN
  10. 10. PRODUCTIVITY <ul><li>In most of the empirical studies on sources of growth, three main elements are labour, capital and Total Factor Productivity. Several contemporary authors who analysed sources of output growth concludes that if output growth is different than the sum of labour and contributions of capital to output growth, the difference is attributed to the residual or Total Factor Productivity (TFP) </li></ul><ul><li>SOLOW MODEL OF GROWTH: Solow Residual </li></ul><ul><li>Cobb-Douglas Production Function: </li></ul>22/02/10 Instructror: Arzu ALVAN
  11. 11. PRODUCTIVITY (CONT’D) <ul><li>In short productivity is the effectiveness with which factors of production are converted into output. </li></ul><ul><li>Accordin g to the Solow’s analysis output growth is equal to the contribution of capital and labour inputs, and technological change . </li></ul>22/02/10 Instructror: Arzu ALVAN
  12. 12. PRODUCTIVITY (CONT’D) 22/02/10 Instructror: Arzu ALVAN T here are three typical assumptions in growth accounting: (a) Inputs are paid their marginal productivity; (b) The production function exhibits constant returns to scale; therefore, cost shares of labour and capital inputs add up to one .
  13. 13. PRODUCTIVITY (CONT’D) <ul><li>If we consider that there is no spesific production function (Harberger’s TDA): </li></ul>22/02/10 Instructror: Arzu ALVAN
  14. 14. PRODUCTIVITY (CONT’D) <ul><li>Equation for the residual under TDA method: </li></ul>22/02/10 Instructror: Arzu ALVAN
  15. 15. TURKEY <ul><li>Dynamic economy of Turkey is a mix of modern industry and commerce. However, the traditional agricultural sector still accounts for more than 35 percent of employment. Labour force of Turkey is 24.7 million, 41.2 percent of which is employed at services and 22.8 percent is employed in the industrial sector. The largest industrial sector is textiles and clothing that accounts for one-third of all industrial employment. </li></ul>22/02/10 Instructror: Arzu ALVAN
  16. 16. TURKEY (CONT’D) <ul><li>Turkish economy experienced three crises successively in 1994, 2000 and 2001. </li></ul><ul><li>Growing current-account deficits can be counted as one of the main reasons behind the crises. </li></ul><ul><li>Before and after crises, the IMF intervened to give advice on macro management of the Turkish economy. Turkey incurred new debts each time the IMF intervened to improve the performance of the economy. From the beginning of the year 2000, Turkey has been indebted by around $20 billion to the IMF. </li></ul>22/02/10 Instructror: Arzu ALVAN
  17. 17. TURKEY (CONT’D) <ul><li>In every economy one of the main objectives is to achieve stable and sustainable economic growth. </li></ul><ul><li>A s a developing country and a candidate to European Union membership, it is crucial to analyse the sources of growth in Turkey. </li></ul><ul><li>Turkey is one of the biggest and most significant countries within Europe and Middle East. </li></ul><ul><li>Like other countries it is also important for Turkey to produce under efficient and productive production processes to get the highest possible volume of output . </li></ul>22/02/10 Instructror: Arzu ALVAN
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  30. 30. THANK YOU… 22/02/10 Instructror: Arzu ALVAN