(Measuring Financial Development of Turkey With Broad-Based Index And Comparison With Other Developing Countries)

Abstract

Purpose – This study primarily aims to determine Turkey's financial development. In this context, the “broad-based index of financial development”, which is introduced by IMF, is used for Turkey for the last 12 years period for the first time. In the second stage of the study, the development index is calculated for a group of developing countries which are compared with Turkish economy due to their similarities in fundamental dynamics, namely Brazil, Malaysia, Poland and South Africa and eventually the results will be compared. Design/Methodology/Approach – In this study, in total, 9 indices are constructed in order to examine different dimensions of financial development. Primarily, six sub-indices are constructed to determine the depth, access and efficiency of both financial institutions and financial markets. In the second step, these indices are aggregated into two indices under financial institutions and financial markets. In the last step, these two indices are used to form the final development index to identify the financial development levels of Turkey and four other developing countries. To be able to construct the financial institutions depth index 4, for the access index 2, for the efficiency index 6; for financial markets depth index 5, for access index 2 and for efficiency index 1, in total 20 explanatory variables are examined. Findings – Financial Development Index which is obtained by aggregation of indices for financial institutions and financial markets finally reveals the level and the order of financial development of the five developing countries. According to that while Malaysia is the most financially developed country, Turkey is in the second rank. The rest of the examined countries are ordered as Brazil, South Africa and Poland. Discussion – As a result of determination of financial development level of Turkey and its rank among other developing countries with the newest and broadest index, this study may play a road map role to policy makers. Furthermore, this study my easily be a pioneer and fundamental study as the indices that were constructed and calculated in this study are open to further micro level analyses.