Abstract:

Whether financial openness and financial development provide major benefits of growth and stability for countries or not has been a fundamental question for research. In response to the idea that financial openness would theoretically promote financial development and that financial development would promote economic growth, the idea that financial development can adversely affect economic growth is also acknowledged. To this end, the study delves into the long-term co-integration relation among financial openness, financial development and economic growth in Turkey based on Engle and Granger (1987) and Philips and Ouliaris (1990) tests for the term between 1997 and 2019, and into the causality of the long-term relation among the variables based on Granger causality test. The variable of financial openness was included in the analysis as net international investment position (%), along with the variable of financial development as total value of traded securities (GDP's percentage), and the variable of economic growth as GDP (annual %). The analyses revealed that there is a long-term co-integration relation among financial development and economic growth, financial openness and economic growth, and financial development and financial openness, and that there is a unilateral Granger causality from financial openness to economic growth.

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