A Financial Cge Model for Turkish Economy with 1996 Data
نویسنده
چکیده
1 Preliminary version, please do not quote. Comments are welcome! ABSTARCT The objective of this paper is to outline our research project about the inclusion of supply-side variables into the CGE framework. Although the model is still in progress, this paper will discuss the basic algorithm we are planning to build in order to include supply-side transmission mechanism into the CGE framework. In particular, the empirical studies show that large private firms operating in the real sector in Turkey diverted significant part of their liquid sources in financial assets during the last decade. This implies that high real returns from financial assets (due to significant budget deficits) outweighed real returns from real activities which in turn not only reduced purchase of physical capital (i.e. investment) but also reduced the funds could have been used in purchase of intermediate input and hiring factors of production. In other words, the firms in real sectors shifted from their primary field of operation and became a banker(s) of government. The objective of this research is to shed some lights on this issue by using CGE framework as an analytical tool. By differentiating between financial returns and real returns, the capacity utilization is no longer operating as exogenous nor is consistent with Keynesian tradition.
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