nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2015‒12‒12
three papers chosen by
Paul Makdissi
Université d’Ottawa

  1. Role of Construction Sector in Economic Growth: New Evidence from Turkey By Erol, Isil; Unal, Umut
  2. Scientific cooperation between the European Union and Turkey – advantages and possible synergies By Agota David; Tamas Szigetvari
  3. Turkish Stream: What Strategy for Europe? By Manfred Hafner; Simone Tagliapietra

  1. By: Erol, Isil; Unal, Umut
    Abstract: After the 2001 financial crisis, Turkey's economy moved full-speed ahead, except for a temporary reversal in 2009 during the global financial crisis. Throughout the years of accelerated growth in 2002-2007 and 2010-2011, construction output increased at a faster rate than the economy as a whole, but in the periods of stagnation in 2001 and 2008-2009, construction industry was the first to suffer. This paper investigates the causal relationship between construction investments and economic growth in Turkey from 1998Q1 to 2014Q4. Unlike the previous studies that use two variable – real GDP and construction industry growth – Granger causality tests, the present study additionally employs three-variable – real GDP growth, construction industry growth, and real interest rate – VAR models to investigate the causal relationships in a multivariate setting. The paper also employs Zivot-Andrews test for determining structural breaks in data and then extends the causality analysis by dividing the seventeen-year sample period into smaller sub-periods that are defined according to the location of breaks in data. The results for the entire sample of 1998-2014 indicate that economic growth in Turkey has preceded construction activities with two- to four-quarters lags, but not vice versa. Hence, unlike the widespread belief that the construction plays a crucial role in Turkey’s economic growth, construction industry is not a driver of GDP growth but a follower of fluctuations in the macro-economy. However, our sub-sample analysis reveals that the causal relationship between economic growth and construction investments varies noticeably across the sub-periods in the national economy. We find that expansion in construction sector caused GDP growth over the last five years. The low interest rate environment with the help of radical changes in urban legislation and city building boosted up the construction industry, which resulted in economic growth in sub-period 2010-2014. Hence, we conclude that the temporary effect of construction industry growth on the GDP growth in the sub-period 2010-2014 is not justified for the overall sample period. Provided that much of the cyclicality in construction investment stems from the sector’s sensitivity to interest rates, we also find that there exists a bidirectional relationship between construction activities and real interest rates both for the entire sample period and for the sub-period 2002-2014. Lastly, construction activities have short-lived effects on the economic growth and thus cannot offer permanent solutions for the economic troubles in Turkey.
    Keywords: Construction industry, Economic growth, Granger causality, VAR models, structural breaks, Turkey
    JEL: C32 O4
    Date: 2015
  2. By: Agota David (Regional Centre for Information and Scientific Development); Tamas Szigetvari (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: The Turkish economy has shown remarkable economic performance over the last decade. Currently, it is the 18th largest economy in the world. To increase its competitiveness, Turkey set research and development as a priority area for the next decade, with the ambitious goal of reaching 3% of GERD/GDP by 2023. Despite several controversies about the EU accession process in general, Turkey is an active member of the European research area. It is an associated member of the RDI Framework Programmes since 2002, it participated in and coordinated various scientific projects, policy-coordination actions, mobility programmes and won grants for excellent researchers. In the Turkish national STI strategy for 2011-2016, the three vertical and six horizontal axes consist of various scientific areas like ICT, Energy, Defence, Water, Food, which have been also set as priority areas in the European H2020 programme. We would like to focus in our article on possible synergies between priority areas, as well as on the role of SMEs in the innovation chain, which are enjoying a special attention in both Horizon 2020 and in Turkish national science and economic policy.
    Keywords: Turkey; cooperation; research and development; Science, Technology and Innovation policy; Horizon 2020; middle income trap.
    JEL: F42 H52 I23 O14 O32
    Date: 2015–11
  3. By: Manfred Hafner (Fondazione Eni Enrico Mattei); Simone Tagliapietra (Fondazione Eni Enrico Mattei)
    Abstract: On December 1, 2014 Russian President Vladimir Putin surprised the energy world by announcing, during a state visit to Turkey, the demise of the long-planned South Stream pipeline project and the launch of a new project to evacuate Russian gas to Turkey and South-East Europe bypassing Ukraine: Turkish Stream. Since 2007 South Stream has represented a key element of the discussions concerning the EU security of gas supply and the overall EU-Russia relations. For this reason, the unexpected demise of South Stream and the quick rise of Turkish Stream need to be carefully evaluated both under the economic and geopolitical perspectives. This paper will first provide an overview of the Russian gas export strategy to Europe in order to entrench the current discussion on the major long-term trends concerning the issue. On the basis of this analysis the paper will then discuss the future prospects of Turkish Stream, arguing that the EU could seize this new reality to launch the formation of a fluid, reliable and interconnected South-Eastern European regional gas hub.
    Keywords: Turkish Stream, South Stream, Energy Security, Gas Markets, EU Energy Union
    JEL: Q40 Q42 Q48
    Date: 2015–05

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