Abstract
This paper analyzes the causes and dimensions of international capital movements and their effects on developing countries with special reference to the case of Turkey. Capital inflows tend to increase imports and decrease exports by appreciating the currency while, simultaneously, increasing the growth rate by stimulating consumption and investment expenditures. In the case of Turkey, where the capital account had been opened before structural problems creating instability were solved and inflation was brought-down, capital inflows have been mostly short-term portfolio investments. Capital inflows and outflows have been closely correlated with sharp fluctuations in the GNP growth-rates in Turkey since the opening of the capital account; and, in general, we may say that the crises since then have originated from the interaction of capital outflows, large debt service and banking sector problems.
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