Abstract:

The aim of this study is to clarify the controversial relationship between financial development and economic growth for Turkey. After surveying the related theoretical and empirical literature, the structure and development of the Turkish financial system and economic growth in process of financial integration is examined. To test the relationship between financial development and economic growth, by using quarterly time series data for Turkey between 1988-2012 period, Vector Auto regression Analysis and Granger causality test are applied. The result of the econometric analysis showed that while there is a short run relationship between financial development and economic growth, there is no long run relationship between these variables. Moreover, according to Granger causality test, the direction of causality runs from economic growth to financial development for Turkey.

Keywords: