Infaltion and the balance of payments in Turkey: 1950-1965

Abstract

This thesis examines the relationships between domestic inflation and the balance of payments in Turkey between 1950 and 1965. The period chosen is interesting in that it encompasses a period of rapid inflation. It is argued that inflation during the whole period aggravated balance of payments difficulties rather than causing them. Exports of primary commodities, especially after 1954 were adversely affected by climatic conditions and imports, even with a rapidly depreciating currency, were not unduly affected by domestic inflation. However, inflation did affect the borrowing capacity of the economy; both private foreign and public foreign credits decreased, as internal economic stability was requested by donor countries. This stability was achieved in 1958. The main aspect of the stabilization programme was an expenditure reducing policy through cuts in monetary expansion. From 1958 the economy entered a stagnant phase, suggesting that both internal and external stability was achieved at the expense of economic development.