Turkey, Recent Economic Performance and Medium-Term Prospects, 1978-1990

Abstract

By 1978, Turkey was in the midst of the most serious foreign exchange and economic crisis it had experienced in three decades. This paper presents an analysis of the 1978-80 crisis period in Turkey and an exploration of the feasibility and sustainability of the ongoing export-led recovery. A computable general equilibrium model of the Turkish economy attempts to capture the basic features of the 1978-81 foreign exchange disequilibrium in Turkey and evaluate their role in the crisis through a series of historical simulations. The model is then used to undertake a series of forward runs for the 1982-90 period which reflect alternative scenarios as to the success and viability of the ongoing shift in Turkish development policy from inward-looking import substitution to outward-focused export expansion. An overview of the model is included in the body of the paper, while Appendix I contains a detailed description and algebraic summary. Appendix II outlines the data sources used for the study.

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