Article Sidebar

Submitted
April 29, 2022
Accepted
February 22, 2023
Published
April 6, 2023
Download
Full text PDF
Statistic
Read Counter : 1118 Download : 3076

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose ― Over the past two decades since the 2000s, Turkey's private savings rates have decreased, which has become a concern for policymakers. In addition to considering the key determinants of private savings, this study primarily aims to quantify the linear and nonlinear impacts of financial development on private savings from 1980 to 2015.


Method ― This study uses Autoregressive Distributed Lag (ARDL) procedure and the Fourier Toda-Yamamoto causality framework.


Findings ― The main findings are as follows: 1) The ARDL bounds test supports the presence of a long-run equilibrium relationship between private savings and its determinants; 2) Financial development affects private savings nonlinearly in an inverted U-shaped pattern, and 3) No causality relationship is observed between private savings and financial development.


Implication ― As financial development has an inverted U-shaped relationship with private savings, indicating that the complementary effect of financial development is replaced with a substitution effect after a certain threshold level, Turkish authorities should consider this evidence when tailoring policies regarding financial markets.


Originality ― This study is the first to identify whether the relationship between private savings and financial development is linear or nonlinear in the context of an emerging economy in Turkey.

Keywords

Private savings financial development Bounds Test Fourier Toda-Yamamoto causality Turkey

Article Details

License

Copyright (c) 2023 Selçuk Akçay

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

Creative Commons License

Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How to Cite
Akçay, S. (2023). The determinants of private savings in Turkey: The role of financial development. Economic Journal of Emerging Markets, 15(1), 1–15. https://doi.org/10.20885/ejem.vol15.iss1.art1
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Aizenman, J., Cheung, Y.-W., & Ito, H. (2019). The interest rate effect on private saving: Alternative perspectives. Journal of International Commerce, Economics and Policy, 10(01), 1950002. https://doi.org/10.1142/S1793993319500029
  2. Ando, A., & Modigliani, F. (1963). The life-cycle hypothesis of saving: Aggregate implications and tests. American Economic Review, 53, 55–84.
  3. Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82(6), 1095–1117. https://doi.org/10.1086/260266
  4. Bulíř, A., & Swiston, A. (2006). What explains private savings in Mexico? (IMF Working Paper No. WP/06/191).
  5. Cavallo, Eduardo, Eichengreen, B., & Panizza, U. (2018). Can countries rely on foreign saving for investment and economic development? Review of World Economics / Weltwirtschaftliches Archiv, 154(2), 277–306.
  6. Ertuğrul, H. M., Gebeşoğlu, P. F., & Atasoy, B. S. (2018). Mind the gap: Turkish case study of policy change in private pension schemes. Borsa Istanbul Review, 18(2), 140–149. https://doi.org/10.1016/j.bir.2017.11.003
  7. Freytag, A., & Voll, S. (2013). Institutions and savings in developing and emerging economies. Public Choice, 157(3), 475–509. https://doi.org/10.1007/s11127-013-0121-7
  8. Friedman, M. (1957). III. The permanent income hypothesis. In Theory of the Consumption Function (pp. 20–37). Princeton: Princeton University Press. https://doi.org/10.1515/9780691188485-005
  9. Fromentin, V. (2017). The long-run and short-run impacts of remittances on financial development in developing countries. The Quarterly Review of Economics and Finance, 66, 192–201. https://doi.org/10.1016/j.qref.2017.02.006
  10. Grigoli, F., Herman, A., & Schmidt-Hebbel, K. (2018). Saving in the world. World Development, 104, 257–270. https://doi.org/10.1016/j.worlddev.2017.11.022
  11. Gungor, H., Ciftcioglu, S., & Balcilar, M. (2014). Does financial development increase private savings? The case of Turkey. International Journal of Business and Social Science, 5(2), 36–47. https://doi.org/10.1142/S0217590816500028
  12. IMF. (2007). Safe to save less? Assessing the recent decline in Turkey’s private saving rate (IMF Country Report No. 07/364). https://doi.org/10.5089/9781451838237.002
  13. Inter-American Development Bank. (2016). Saving for stability. In E. Cavallo & T. Serebrisky (Eds.), Saving for development (pp. 109–130). New York: Palgrave Macmillan US. https://doi.org/10.1057/978-1-349-94929-8_5
  14. Ito, H., & Chinn, M. (2007). East Asia and global imbalances: Saving, investment, and financial development (NBER Working Paper Series No. w13364). https://doi.org/10.3386/w13364
  15. Keynes, J. (1936). General theory of employment, interest, and money. New York: Harcourt Brace Company.
  16. Lind, J. T., & Mehlum, H. (2010). With or without U? The appropriate test for a U-shaped relationship. Oxford Bulletin of Economics and Statistics, 72(1), 109–118. https://doi.org/10.1111/j.1468-0084.2009.00569.x
  17. Marshall, M. G., Gurr, T. R., & Jaggers, K. (2018). Polity IV project: Political regime characteristics and transitions, 1800–2017. Vienna.
  18. Matur, E. P., Sabuncu, A., & Bahçeci, S. (2012). Determinants of Private Savings and Interaction Between Public & Private Savings in Turkey. Middle Eastern and African Economies, 14(September), 102–125.
  19. Nazlioglu, S., Gormus, N. A., & Soytas, U. (2016). Oil prices and real estate investment trusts (REITs): Gradual-shift causality and volatility transmission analysis. Energy Economics, 60, 168–175. https://doi.org/10.1016/j.eneco.2016.09.009
  20. OECD. (2015). Pension markets in focus. Retrieved from http://www.oecd.org/daf/fin/private-pensions/Pension-Markets-in-Focus-2015.pdf
  21. Özatay, F. (2016). Turkey’s distressing dance with capital flows. Emerging Markets Finance and Trade, 52(2), 336–350. https://doi.org/10.1080/1540496X.2015.1011539
  22. Ozcan, K. M., Gunay, A., & Ertac, S. (2003). Determinants of private savings behaviour in Turkey. Applied Economics, 35(12), 1405–1416. https://doi.org/10.1080/0003684032000100373
  23. Ozcan, K. M., Gunay, A., & Ertac, S. (2012). Macro and socioeconomic determinants of Turkish private savings. Journal of Economic Cooperation and Development, 33(2), 93–130.
  24. Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. In S. Storm (Ed.), Econometrics and Economic Theory in the 20th Century: the Ragnar Frisch Centennial Symposium (pp. 1–31). Cambridge: Cambridge University Press. https://doi.org/10.1017/CCOL521633230
  25. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
  26. Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346. https://doi.org/10.2307/2336182
  27. Presidency of the Republic of Turkey. (2015). Presidency of strategy and budget, the shares of total domestic savings and gross fixed investments in GDP (1975-2015). Retrieved August 13, 2020, from http://www.sbb.gov.tr/ekonomik-ve-sosyal-gostergeler/#1540021349032-1be70108-294c
  28. Sahoo, P., & Dash, R. K. (2013). Financial sector development and domestic savings in South Asia. Economic Modelling, 33, 388–397. https://doi.org/10.1016/j.econmod.2013.04.018
  29. Shawa, K. C. (2016). Drivers of private savings in Sub-Saharan African countries. Journal of Economic Development, 41(2), 77–110. https://doi.org/10.35866/caujed.2016.41.2.004
  30. Sirowy, L., & Inkeles, A. (1990). The effects of democracy on economic growth and inequality: A review. Studies In Comparative International Development, 25(1), 126–157. https://doi.org/10.1007/BF02716908
  31. Svirydzenka, K. (2016). Introducing a new broad-based index of financial development (IMF Working Papers No. 16(05)). https://doi.org/10.5089/9781513583709.001
  32. Tatlıyer, M. (2018). Saving behaviour in Turkey: Where are we? And what can we do about it? In A. F. Aysan, M. Babacan, N. Gur, & H. Karahan (Eds.), Turkish Economy (pp. 239–260). Cham: Springer International Publishing. https://doi.org/10.1007/978-3-319-70380-0_11
  33. Tunc, C., & Yavas, A. (2016). Not all credit is created equal: Mortgage vs non-mortgage debt and private saving rate in Turkey. Central Bank Review, 16(1), 25–32. https://doi.org/10.1016/j.cbrev.2016.03.003
  34. Van Rijckeghem, C. (2010). Determinants of Private Saving in Turkey: An Update (No. 2010/04). Bogazici University Working Papers. Bogazici University, Department of Economics.
  35. Wang, P., Xu, L., & Xu, Z. (2011). Financial development and aggregate saving rates: A hump-shaped relationship, mimeo (SSRN Electronic Journal). Hong Kong. https://doi.org/10.2139/ssrn.2085277
  36. World Bank. (2011). Sustaining high growth: The role of domestic savings: Turkey Country Economic Memorandum Report No.66301-TR,. Washington DC.
  37. World Bank. (2020). World development indicators.
  38. Zivot, E., & Andrews, D. W. K. (1992). Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. Journal of Business & Economic Statistics, 10(3), 251–270. https://doi.org/10.2307/1391541
No Related Submission Found