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.
1.1 Introduction
In this section, Capital Flows is discussed, with relevant and recent citations. As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the aim and objectives of the study. Others are significance of the study, scope of work, research hypothesis and questions, limitation of the study and definition of terms.