Abstract

This study applies Thirlwall’s law to Turkish economy from 1987:Q1 to 2011:Q4 period using Autoregressive Distributed Lag (ARDL) model and Kalman Filter method. Turkish economy has balance of payments deficits for last three decades. According to Thirlwall’s law this deficits constrains countries’ growth rates and therefore when countries long term growth rates are analyzed the demand side of the economy and the balance of payment performance must be taken into account. The hypothesis of Thirwall’s law is tested by various forms of the model. The finding implies that balance of constraint growth model is not valid for Turkey.

 

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