International Conference on Eurasian Economies
12-14 October 2011 – Bishkek, KYRGYZSTAN
Paper detail
Paper ID : 330
Status : Paper published
Language : Turkish
Topic : Regional Economics
Presenter: Asst. Prof. Dr. Harun Doğan
Session : 5C Orta Asya Ekonomileri II
A Test of the McKinnon’s Complementarity Hypothesis between Money and Physical Capital in the Case of Kyrgyzstan
McKinnon’ın Para ve Fiziki Sermaye Arasında Tamamlayıcılık Hipotezinin Kırgızistan Örneğinde Testi
- Asst. Prof. Dr. Harun Doğan (Kyrgyz-Turkish Manas University, Kyrgyzstan)
Abstract
The main purpose of this study is to empirically investigate the validity of McKinnon’s complementarity hypothesis on economic growth of Kyrgyzstan for the period of 1996–2009. McKinnon’s (1973) central thesis argues poorly functioning financial systems in developing countries may effect investment quality and growth rate of the economy in negative direction. McKinnon’s (1973) complementary hypothesis predicts that money and investment are complementary, to the contrast neoclassical and Keynesian theory, due to a self-financed investment in developing economies. In other words, according to McKinnon, financial liberalization should generate positive impacts on growth as consequence of positive relation between money and physical capital in developing countries after financial liberalization. The empirical researches conducted on complementarity hypothesis have found mixed results on the link between money and physical capital. However, empirical analysis of Kyrgyzstan’s economy is very important because of its peculiarities, it has both a trancition and developing economy, which in case of the McKinnon’s complementarity hypothesis is very essential. Thus, Kyrgyzstan, as many developing countries, have undertaken financial liberalization programs during the past twenty years after collapse of Soviet Union. Therefore, the study analyzes long run and short run association among the real rate of interest on deposits, private investments, economic growth, and domestic savings behavior in Kyrgyzstan, using annual time series data for 1996-2009 with techniques of ARDL Cointegration Error Correction Model. The results does not support the McKinnon’s complementarity hypothesis between money and physical capital on the period for 1996-2009 in the Kyrgyzstan’s Economy.
JEL codes: C12, E20, E40
Doğan, Harun (2011). "A Test of the McKinnon’s Complementarity Hypothesis between Money and Physical Capital in the Case of Kyrgyzstan" in Proceedings of International Conference of Eurasian Economies 2011, pp.343-349, Bishkek, KYRGYZSTAN.
DOI: https://doi.org/10.36880/C02.00330
Session 5C: Orta Asya Ekonomileri II
