American Journal of Economics and Business Administration

Impact of Financial and Trade Openness on Financial Development in Emerging Market Economies: The Case of Turkey

Esin Cakan

DOI : 10.3844/ajebasp.2017.71.80

American Journal of Economics and Business Administration

Volume 9, Issue 4

Pages 71-80

Abstract

The study aims to examine whether the intensity of financial openness, trade openness and foreign direct investment promoted financial development in Turkey for the period 1974–2014. Three financial development indicators are used constructing the data from the World Development Indicators. Autoregressive Distributed Lag Model (ARDL) and the bounds tests are employed to show the long run relationship among variables. The empirical results suggest that financial openness and foreign direct investment have a predictive power in fostering financial development. More, trade openness does not have predictive power on financial development. It can be concluded that financial openness and foreign direct investment can be used to foster financial development as well as economic growth in the case of Turkey. These results has very important inferences on the Turkey’s Custom Union agreement with the European Union.

Copyright

© 2017 Esin Cakan. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.