Abstract: Using semi-annual data from 1993 to 2003 for all publicly traded manufacturing firms in Turkey , this paper explores the impacts of macroeconomic uncertainty and external shocks on profitability of real sector firms in the presence of multiple investment options in both real and financial sectors. The paper argues that increasing availability and accessibility of investment opportunities in the financial markets help real sector firms sustain profit margins despite market rigidities, increasing goods market competition, or higher levels of risks. The empirical results based on dynamic panel estimations show that increasing macroeconomic uncertainty and volatility have a significantly negative effect on firm profitability. In contrast, increasing share of financial investments in total assets is found to be reducing such negative effects at a statistically and economically significant level.
Abstract: Using firm level panel data, we analyze the impacts of rates of return gap between financial and fixed investments under uncertainty on real investment performance in three emerging markets, Argentina , Mexico and Turkey . Employing a portfolio choice model to explain the low fixed investment rates in developing countries during the 1990s, we suggest that rather than investing in irreversible long term fixed investments, firms may choose to invest in reversible short term financial investments depending on respective rates of returns and the overall uncertainty in the economy. The empirical results show that increasing rates of return gap and uncertainty have an economically and statistically significant fixed investment reducing effect while the opposite is true with respect to financial investments.
Abstract: Using micro-level panel data, the paper analyses the impacts of short-term capital flow volatility on new fixed investment spending of publicly traded real sector firms in three major emerging markets that are Argentina, Mexico and Turkey. The empirical results including comprehensive sensitivity tests suggest that increasing volatility of capital inflows has an economically and statistically significant negative effect on new investment spending of private firms. Accordingly, a 10 per cent increase in capital flow volatility reduces fixed investment spending in the range of 1-1.7, 2.3-15.1, and 1 per cent in Argentina , Mexico and Turkey respectively.
Abstract: The paper analyzes the impacts of cash flow from multiple investments in real and financial sectors on the new fixed investment spending of real sector firms. The empirical results based on the Euler equation approach and semi-annual firm level data from two major emerging markets, Mexico and Turkey , suggest that profits and rates of returns from fixed and financial assets have differential effects on fixed investment spending of real sector firms. Accordingly, increasing availability and accessibility of alternative investment opportunities in financial markets can become instrumental in channeling real sector savings to short-term financial investments instead of long-term fixed capital formation and thus lead to deindustrialization.
Abstract: The paper by using micro-level data analyzes the impacts of macroeconomic uncertainty and country risk on real investment under financial liberalization. The results suggest that increasing macroeconomic volatility and country risk hurt fixed investment spending of real sector firms.
Abstract: The last two decades have witnessed resurgence in South-South trade, investment, and regional integration. This paper examines trade performance in total and technology-and-skill-intensive manufactures for a sample of 28 developing countries with both developed (South-North) and other developing (South-South) countries. Previous studies and our sample data shows that South-South trade in manufactures is characterized by higher capital and skill intensive factor content relative to South-North trade with major implications for development in the South including the possibility of dynamic gains through learning by exporting, technological externalities, allocative efficiencies and scale economies. The paper concludes by discussing obstacles for increasing South-South trade and possibilities for future research on the topic.
• “The Rise of Rentier Capitalism and the Financialization of Real Sectors in Developing Countries.” Review of Radical Political Economics , 39 (3): 351-359, 2007.
Abstract: Using micro level company panel data, I analyze the impacts of financial liberalization on real investment behavior under capital market imperfections, volatile macro-prices and changing county risk levels. I argue that financial liberalization in developing countries has become instrumental in channeling real sector savings to speculative short-term investments instead of long-term investment projects and hence altered the pattern of capital accumulation in the real sectors of the economy.
Abstract: This article analyses the role of historically-determined institutional and political characteristics in determining both the nature of the adjustment process, and its economic and political outcomes, in Turkey. In particular, the author explores the degree to which the formation of rent-seeking coalitions has contributed to the failure of neo-liberal economic reforms in the country. The analysis suggests that the Turkish experience since the early 1980s offers a unique case for studying the relationships between the state bureaucracy, the military, the business sector, civil society, and international economic actors. Unlike previous research in this area, this article focuses especially on the role of the military as an interest group in the process of economic liberalization in Turkey.
Abstract: The risks and benefits of financial liberalization is a highly contentious issue in the current economic debate. This article focuses on Turkey’s ‘‘lost decades’’ and tries to reveal the underlying factors behind the economic collapse in the country. Two elements will be analyzed: (a) the role of public sector together with the domestic banking sector in setting the stage for alternating financial crisis, and (b) the effect of close correlation between external debt and capital flight on the economy. This paper argues that there exists a contemporaneous bi-directional causality between external debt and capital flight in the Turkish economy. Exploration of this fact may have some important implications for economic policy modeling in Turkey’s crisis-ridden economy.
BOOK CHAPTERS
Abstract: After three decades of market-oriented reforms along the Washington consensus, full employment has not yet been materialized in developing countries despite significant gains in fiscal and monetary discipline, and price stability. The current study analyzes the sources of structural transformation in the labor markets of developing counties after liberalization and structural adjustment programs using Turkey as a case study. We argue that the experience of Turkey as a major developing country with almost three decades of liberalization experience is not unique and can help determine the causes of disappointing labor market performances observed in other countries. In exploring the sources of sluggish employment creation major attention is given to liberalization, fixed capital accumulation, growth and labor market interaction. The paper also explores the effects of liberalization programs on labor market flexibility, distribution, wage-productivity link, and gender divisions in labor markets.
• “Volatility of Short Term Capital Flows and Socio-Political Instability in Developing Countries: A Review.” In T.N. Caldeira (Ed.), Economics of Developing Countries (pp.53-77). Nova Science Publishers, 2009..
Abstract: The paper reviews the theoretical and empirical evidence on the relationship between financial liberalization and socio-political risk by identifying the inter-dependent nature of socio-political and economic fault lines . In particular, the research examines the dynamic relationship between the volatility of short-term capital flows and socio-political instability. Accordingly, the socio-political risk is argued to be endogenously determined with the volatility of short term capital inflows such that increasing volatility by disrupting market activities, domestic investment and growth increases socio-political risk, which further feeds into the volatility of such flows. Using evidence from three major developing countries that are Argentina , Mexico and Turkey and applying Granger causality tests and Impulse Response Functions, the paper finds support for the presence of an endogenous relationship between the volatility of short-term capital inflows and socio-political instability. The results challenge the previous research regarding the use of political risk as a purely exogenous variable.
• “ Economic Development and the Fabrication of the Middle East as a Eurocentric Project .” In R.K. Kanth (Ed.) The Challenge of Eurocentrism (pp.63-82). MacMillan, 2009 (with F. Kaboub).
Abstract:This paper examines value creation and distribution in acquisitions in the context of Turk Telekom privatization. We find that operational synergies, in addition to traditional sources of synergies, play an important role in value creation. Specifically, re-allocation of resources from in efficient business units to efficient ones contributes to value creation. We also document that the privatization method as well as the post-privatization regulatory framework are significant determinants of the success or failure of privatization programs in developing countries especially with regard to increasing competition, efficiency and value transfer to the public.