Balance-of-payments constrained growth model for the Turkish economy

- The validity of Thirlwall's growth model is tested for the Turkish economy.
- The model implies the long-term economic growth.
- Long-run behavior of GDP and export is investigated by the cointegration method.
- Rising elasticity of import to income reduces positive effect of export on GDP.
- The Thirlwall model is proved to be valid for the sampling period.

Economists have investigated the relationship between output and export in order to explain economic growth for long years. Numerous studies have found very close correspondence between the growth of output and export. It is commonly known that Thirlwall's papers indicate very tight relationship between the growth of output and the ratio of the growth of exports to the income elasticity of demand for imports. This paper aims to apply Thirlwall's balance-of-payments-constrained (BPC) model for the Turkish economy for 1968-2011 period. This research also evaluates the procedures of testing Thirlwall's principle by estimation of the income elasticity of demand for imports using the test of stationarity and cointegration methods. The findings are in accordance with the Harrod-Thirlwall growth model. The test results of Johansen cointegration procedure and the comments on these results are presented as well.