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Financialization, economic development and crisis

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In search of alternative economic policies

An alternative economic policy could help provide answers to the current global debt crisis.

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Although the world economy is in financial turmoil and the economic crisis has spread across the EU, further research is still needed to explain the causes. Looking at what determines economic development and growth can be helpful in devising an alternative economic policy. This was the aim of the project FINANCIALIZATION (Financialization, economic development and crisis). With the use of a theoretical and applied component, the focus was on the Turkish economy. A combination of economic modelling and empirical data analysis was used alongside historical political economy analysis. Research examined various links. One example is the link between capital inflows and credit expansions. It revealed that net private capital inflows, after controlling for other determinants of credit, are positively associated with periods of rapid credit expansion in Turkey. It was found that Turkey's private sector (both banks and non-financial corporations) has significantly increased its foreign exchange borrowing. Consequently, it is faced with a large net open position, increasing the risk of a currency mismatch. Findings were presented at international conferences and submitted to leading academic journals. The work can help contribute to European excellence and competitiveness by filling a very significant gap in the economics literature.

Keywords

Economic policy, debt crisis, economic development, financialization, economic modelling

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