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CAPITAL FLOWS

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ABSTRACT

Recent financial crisis in Turkey as well as in Mexico revived the interest in the question of capital flows in developing countries. This paper examines the issue of capital flows with special reference to Turkey. Given that there is no one generally accepted definition of capital flight and hot money, the magnitude of capital flows will tried to be measured, using the most suitable definitions for Turkey. Then the degree of openness of Turkish economy; i.e., the environment in which capital transactions take place is estimated. The results show that the bank credits are the most dominant form of capital flow in Turkey and that the Turkish financial markets are quite well integrated with the world financial markets. Even though the magnitude as well as the direction of the flows depend on the measures used, capital flows are not of significant importance in Turkey, compared to that of the Latin American and Asian countries.


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