Relationship between Trade Openness, Credit Volume and Economic Growth in Turkey: Time Series Analysis with Multiple Structural Breaks

In this study, the relationship between trade openness, credit volume, and, economic growth is analyzed for 1989-2014 periods for Turkey and by multiple structural breaks unit root test of Carrion-i-Silvestre et al (2009), Toda-Yamamoto causality test, multiple structural breaks co-integration test of Maki (2012), and dynamic ordinary least squares method. In the causality test, it is concluded that bi-directional causality relationship between growth and credit volume on the one hand and between growth and real interest rate on the other hand exists through a one-way direction of causality from trade openness to credit expansion and from credit expansion to reel interest rate. It is found out that a long-term relation exists among the variables in co-integration test of Maki. In the co-integration coefficient, which is estimated by dynamic ordinary least squares method, it is ascertained that while credit volume increases economic growth, interest rate and trade openness decreases it.