Financial Fragility in Turkey: A Minskian Approach

Abstract

This study, depending on a Minskian framework, analyses financial fragility in Turkish economy from a Post Keynesian perspective for the period between 1988 and 2010. We compare incremental profit rate, rate of capital accumulation and the real interest rate which is the cost of borrowing. Results show that, throughout the period, Turkish economy experienced different states of financial fragility. Following a period of speculative finance at the beginning of the period, Turkish economy was hedged from 1992 to 1996 and moved to a phase of ponzi finance between 1997 and 2003. The 2004-2009 period was a period of hedged finance, however the rate of capital accumulation exceeded the incremental profit rate at 2010 indicating the onset of a new speculative phase.