Abstract:

The aim of this study is to explore the effects of financial liberalization on aggregate saving rates in Turkey. To measure these effects, three indicators have been used; real interest rates -as a measure of financial repression-, liquidty constraints and financial depth –as measures of financial development’s level. Since higher real interest rates do not lead to higher saving rates, the results do not support McKinnon-Shaw hypothesis for Turkey. Also, the results show that financial development’s indicators have opposite direction effects on aggregate saving rates in Turkey. On the other hand, the findings show that saving rates rise with the growth rate of real per capita income. So, policies that spur development are an indirect but effective way to raise aggregate savings.

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