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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Relationship Between The Sustainable Development and the
Vision of Nations: The Sample of Ottoman Empire
Hasan ĐBĐCĐOĞLU
Süleyman Demirel University, Çünür/Isparta
hibici@iibf.sdu.edu.tr
Belma AK
Süleyman Demirel University, Çünür/Isparta
bak@iibf.sdu.edu.tr
Münire ÇĐFTÇĐ
Süleyman Demirel University, Çünür/Isparta
munire@iibf.sdu.edu.tr
Đbrahim Yaşar GÖK
Süleyman Demirel University, Çünür/Isparta
yasargok@iibf.sdu.edu.tr
Seher DERYA
Süleyman Demirel University, Çünür/Isparta
seher@iibf.sdu.edu.tr
Abstract: A global, rapidly changing and advancing world of information age, states in terms
of standing and resources to be effective, efficient and people have to use it to live in
prosperity, especially in a state that is not strong in the universal space is a problem. Using
resources effectively and efficiently be transferred to future generations to improve the quality
of life with modern standards, requires a solid and consistent work. This study is one of the
sustainable development of future generations to meet their own needs against the needs of our
time while not restrict the ability. The conscious of joint action to ensure sustainable
development has played a significant role. Individual interests and rant fight are the greatest
obstacles in front of the sustainable development. This energy and expectations of individual
should be canalized to common area. This area is the requests and the ideals of the nations. In
terms of sustainable development, a picture of national requirements should be drawn and this
picture is coherent and realistic, must be shown to the nation. That is; a nation vision should be
created. Because nations are respected and strong at the rate of their national aims. The national
aims are the dynamic power, the reason of unity and the resource of courage for nations.
In this study, indicating mission and vision of the nations according to the sustainable
development, it is highlighted from Ottoman Empire to the Turkish Repuclic by explaining the
created visions and the mission perception that shaped the visions and achieved points in the
end.
With this study, we can conclude that there is a relationship between the mission perception of
nations and visions which are improved by this perception and the mission perception with
vision factor are the dynamics of the sustainable development.
Key Words: Sustainable development, Vision, Ottoman Empire
Introduction
The The Holy War (Gaza) thought boost after having been accepted of the Islam by the Turks and ‘the
fighting for religion’ phenomenon lying under this thought did not come against warrior structure of the Turks.
The Ottomans, the last empire of the Turks continued this ‘gaza policy’ .
The Gaza policy continued as a chain from Ertuğrul Bey to Osman Bey and Osman Bey to Orhan Bey
didn’t base on only thought of having large territory that was targeted by many states. The vision of
‘dissseminating the Islam and its impact seemed clearly on the Ottomans, was providing directions to this idea.
The Ottomans never assimilated people in the conquered places after realized conquest and they
approached tolerant to the public and in many places, after some time from the conquest, people adopted and
accepted the Otoman Empire. This an evidence to that the idea that the gaza thought didn’t base on domination
phenomenon. With the famous historian Gibbon’s phrase: ‘While the Jews was killed totally and the inquisition
was spreading death, people with several religion were living in peace and harmonization under the rule of the
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Ottomans. The famous profesor and the historian C. Brockelmann says that The Muslim Turks had the power
and opportunity to alter the Christianity during their conquest but their religion doesn’t allow this.
During the transition process to the Otoman Empire ‘’to disseminate the Đslam’ vision was accepted by
all parts and it became an ideal. This vision directs the government to govern the people with justice moral and
stability and directs people to trust and like the government and thus there is a strong tie between people and
government. The reason for this strong tie is the Islamic thought that orders to like the government and to be fair
in governing. The Ottomans who approaches the people with the same thoughts enable people to choose the
Islam with their own decision.
The mission of thinking the citizens that is formed through the vision of disseminating Đslam develop
the Otoman Empire and each victory accelarated the this development process.
Development, is a social phenomenon and should be evaluated within the social structure. Social
structure also houses many problems. When this issue is taken into consideration today’s analysis are inadequate
for development. Whether the formation of resources, or use, or the distribuition phase factors other than
economic directly influence development process. This fact makes it essential that all these mentioned factors
required to be included in the analysis. In order to analyse such a social problem, there are limitations to reach a
result and these results can only be overcome when it is supported by other factors. (Yavilioğlu :116)
From this perspective vision has been handled as an affect on the development. The relationship
between the Ottoman vision and the development has been questioned by taking account of the development in
the Ottoman Empire. In this work, first of all the literature is analyzed and the frame of the vision and the
sustainable development have been mentioned.
In the process of Ottoman Empire all the beneficial activities from establishment to standstill with the
vision of Otoman Empire has been analyzed by taking into account the progress.
Conceptual Literature
People know, while doing something, what the society expect him/her to do by making use of existing
institutional system and he/she does the expected behaviour
Institutional system which shapes the human behaviour has some identifier. These identifiers takes
place in the literature as designs of life. Designs of life are shared: most of the people are reconciled on the
designs of life. They are not dependent on the judgement of any people. Designs of people happens with
enthusiasm. People does self sacrifice and even die for the holy values. They are taken seriously. People regard
these values together with the meeting of social requirements and saving of the mutual prosperity.
(Yivilioğlu:117).
When we take into consideration the characteristics of designs of life, it is possible t o say that vision is
one of these designs of life. The etimological roots of the vision derives from “seeing” .
A simple definition of vision is: 'a picture or view of the future. Something not yet real, but imagined
(Thornberry:28). Vision is a mental journey from the known to the unknown, creating the future from a montage
of current facts, hopes, dreams, dangers and opportunities (Manasse:1).
Warren Bennis ve Burt Nanus say that the most critical point of the vision is to show the realist thought,
credibility an attractive future for organisation and most problems better than the current situation in a very clear
way.
Kotter argued that the content of the vision must be sensible and clearly understood by organizational
members; content without clarity is ineffective. Likewise, Collins and Porras advised that “vision must be
translated from words to pictures with a vivid description of what it will be like to achieve your goal”
(Cole:354).
The vision that is expressed by a mutual Picture is adopted by the whole organization. To coincide the
aim of the organization and the aim of the members is done. In this point of view vision is the tool that enables
organisation to act for the mutual aim.
Goldberg (1997) says that in order to have a strong vision, the vision that is developed by the supervisor
and the managers should help the development and change of the company.(Eren)
According to Peter Senge a shared vision is not only an idea it is a strength that motives people. A
shared vision is an answer to the question “What do we want to do?” In his book Fifith Discipline he defines
vision a shared vision as an hologram. Because when the hologram is cut it reflects the whole with each angle
and when it is united it makes the whole.(Senge 226-239)
Nations as well as the organizations need to follow the change and adjust the new developments.
National vision is the roots of the National developments. National vision enables the economical social political
and cultural aims to happen. That constitutes the development.
Development is a social phenomenon and must be analyzed in the social structure. Social structure takes
socio cultural political psyhological and economic whole in itself. In other words the social structure is a
complex of economy, politic, culture and the family.
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The first popularly accepted definition of sustainable development arose from the report of Norwegian
Gro Harlem Brundtland who, with her Commission members, suggested in 1987 that the world should be
“meeting the needs of the present without compromising the ability of future generations to meet their own
needs” (Lawrence:3).
In early 2007, Donald Kennedy, a Harvard-trained biologist, former president of Stanford University,
and since June1, 2000 the editor-in-chief of Science, wrote that ‘‘sustainability would require that a resource be
technically managed in such a way that its contribution to human welfare is conserved or improved for
succeeding generations.’’Sustainable development -meeting the needs of people alive today without
compromising the ability of future generations to meet their own needs - will be one of the key forces guiding
public policy development in the years ahead. (Brauer:7).
In a country sustainable development can only be done by social economic and ecological
sustainability that means the phenomenon of the social development is an economical development which does
not consume the national sources and save balance between the eco system and the economy. (Alagöz:3-4).
Vision of Ottoman Empire and Sustainable Development
Vision of “fighting for religion” (spreading Islam) appearing with Turks’ acceptance Islam was
depending on an idea to establish Islam to the places that don’t know Islam. The Holy War (Gaza) policy, that
was considered in accordance with this policy, was realized efficiently on these years and holy wars revealed
development and development revealed holy wars respectively. This eventual development continued until
1700’s and Ottomans lived a progress from seigniory to state and state to empire. Policies realizing in
accordance with vision of fighting for religion provided the development of Ottomans and caused the long-year
continuence of this.
Ottoman State, that reached a three-continent structure with this vision until years 1700, afterwards
entered a term meaning some changes in perception and declinations in the vision of fighting for religion.
Ottoman state going far from the basic vision took the state to an unstable condition. A lethargy term started to
occur with the increases of the wealth of public and maximum level of growth at managerial level specially
palace administration. Soltans who led every wars during the process of transition from seigniory to state, not
joining the wars after the years 1700 and not leading the army with the title of khalif is the result of going far
from the basic vision perception. With this alienation from the idea of gaza lost its importance, administration of
the army was damaged and fiscal structure of the state went worse. All of these advancements lasted with the
collapse of the empire. But a probing point is that the public didn’t go far from this basic vision during the
collapse of state. Because an existence challenge was performed with limited opportunities against huge forces
just against collapse period. Actually Ottoman State, that didn’t loose the First World War, has been acceppted
as looser with the missings of allied countries.
Acting with the vision of “fighting for religion” until the discontinuance period caused Ottomans to
develop and performing some efforts for the wealth of public.
Below table, composed in accordance with the information given by Öztuna, (p:17-265) show that
frontiers of Ottoman state expanded with every new Soltans.
Ottomans, which had a development economically with the expanding of lands, had a stable condition
at income and expense at the budget. There was no difference between incomes and expenses in treasury at the
term of Kanuni (Soleman The Magnificient). However incomes of treasury reached to 1830 loads namely
183.000.000 golds and expenses reached to 3000 loads namely and in 1597 incomes reached to 3000 loads and
expenses reached to 9000 loads. (Seyithanoğlu: 1993)
Socio-cultural structure developed with the economical development and some evidences occured
supporting sicence and cultural activities at many provinces and districts. Many mosques and moslem
theological school (medrese) and chams in Anatolia and Balkans from Süleymaniye to Selimiye and Ecyad
Castle, collapsing in Arabia, may be given as examples.
Foundation system was established to prevent the poverty and compensate the needs of public. In this
sense every foundation has a land and incomes of the land belongs to foundations and conpensating the needs of
the public has importance. 2860 foundations were established in Đstanbul during the years 1519-1596. (Barkan
XXXI)
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Table 1. Frontiers of Ottoman Empire During the Administration Period of Ottoman Soltans
Soltans
Before
After Administration
Administration ( km 2 ) ( km 2 )
Asia
( km 2 )
Europe
( km 2 )
Africa
( km 2 )
Ertuğrul Bey
1000 ila 2000
4800
4.800
***
***
Osman Bey
4800
16000
16.000
***
***
Orhan Bey
16000
98000
98.000
***
***
I. Murat
Yıldırım
Beyazit
98000
500.000
208.000
291000
***
500.000
942.000
500.000
441.000
***
Çelebi Mehmed 942.000
872.000
***
***
***
II. Murat
Fatih Sultan
Mehmed
872.000
950.000
***
***
***
950.000
2.214.000
511.000
1.703.000
***
II. Beyazit
Yavuz Sultan
Selim
Kanuni Sultan
Süleyman
2.214.000
2.373.000
596.000
1.777.000
***
2.373.000
6.557.000
1.905.000
1.702.000
2.950.000
6.557.000
14.893.000
4.169.000
1.998.000
8.726.000
III. Murat
14.893.000
23.000.000
5.729.285
3.543.662
13.725.464
According to the 953/1546 dated Đstanbul Foundations Census Records, “public” foundations in
Đstanbul had more than 4000 houses, 5717 shops, 28 caravansaries, 19 khans, 38 canvas factories, 18 cisterns, 14
basements, 68 bakehouses, 199 villages, 40 hamlets and 228 mills for income. Capital of the 1150 cash
foundations reached 21.385.786 golds between the years 1456-1546. (Barkan XXXI)
Some foundations were composed in the subjects of equipment of poor girls, arrangement of streets
(social), treatment of ill and disabled storks, giving meat to cats and dogs (environmental), paying the debts of
people in the prison because of debts (social). Also foundations provided funds for the establishment of many
monuments contributing social life. Mosque, masjids, foundations, schools, cultivations, hospitals, baths,
caravansaries, khans also social complexes, public fountain, water-tank with fountain, roads, domes, markets,
wells, hot springs, squares, libraries, bridges, ports, beacons, channel, water channels, dams are some examples
of these monuments.
Suggestions and Conclusion
Settlement at economical, social and environmental target and policies with the vision of “spreading
Islam” developed Ottomans and made it sustainable by extending over a long time. Ottomans composing
economical (extending the limits of economical progress, gaza idea), social (fair wealth disturbance, efforts to
prevent poverty), environmental (efficient usage of natural resources) targets in accordance with this vision is the
sign of sustainable development.
The vision of “spreading Islam” is one of the most important factors of sustainable development which
was in progress until the end of rising term of Ottomans. Many factors as prince training before acceding,
foundation policies developed by government, renewal movements at army, administration policies of
bureaucracy were developed in accordance with this basic vision. State continued development during the
application of this vision and every soltan developed the country than older soltans. Respective acceptance of
this basic vision without refusal is an important reason.
There have been economical, sociological, political and cultural developments paralel to this vision.
Development of treasury, state getting a stronger condition to help other countries, trade moving around the
lands and ports of Ottoman state can be shown as the signs of economical developments. Gladness of Ottoman
public from the administration, Ottoman state being respectful to different beliefs and not assimilating different
nations may be examples for social aspect of development. Ottoman state being super power of the world, a state
administering nations in three continents and other countries not developing policies without considering
Ottoman state and composing an effect area between India and England and Africa and Russia may be stated as
the political aspects of development.
Finally a direct relationship can be mentioned between the vision of nations and sustainable
development. Realizing the development with national visions embracing the public in spite of specific visions
of leaders. Because this conditions appropriates development to public and development becomes a routine life
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vision in spite of realizing in a specific term. But declinations ,as just seen in Japans and perivously in Ottomans,
at the national visions causes development to access in a decreasing process and is a major obstacle on
sustainable development. Because of this not lowering the visions and keeping them alive has a big importance.
Vision which is one of the factors that people may devote theirselves to make changes in the direction
of national development, both is social and another aim –whether having different ideas- should be considered.
References
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Yapılan Bir Araştırma”, Selçuk Üniversitesi, Sosyal Bilimler Enstitüsü Dergisi, Sayı 11, ss:1-29
Alagöz, M.,(2004), “Sürdürülebilir Kalkınmada Çevre Faktörü:Teorik Bir Bakış”, Akademik Bakış Uluslararası Hakemli
Sosyal Bilimler E-Dergisi, Sayı 11.
Barkan, Ö. Lütfi –Ayverdi, E Hakkı (1972). Đstanbul Vakıfları Tahrir Defteri 953 (1546) Tarihli, Đstanbul. Akt. Nazif Öztürk
“Sosyal. Siyaset Açısından Osmanlı Dönemi Vakıfları”, <http://www.sosyalsiyaset.com/documents/osmanli_vakiflari.htm>.
(01.04.2009).
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Economics and Development, Book volume:6.
Cole M. S., Harris S. G. and Bernerth J. B. (2006). “Exploring the implications of vision, appropriateness, and execution of
organizational change”. Leadership & Organization Development Journal, Vol. 27 No. 5, pp. 352-367.
Cole, M. S., Haris, S. G. and Bernerth, J. B., (2006), “Exploring the implications of vision, appropriateness and execution of
organizational change” Leadership & Organization, Development Journal, Vol. 27 No. 5, pp. 352-367.
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Sayı 1.
Döğüş S., (2008), “Avrasya Steplerinde Đlk Gaziler”, Selçuk Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Sayı 20
Eren, E., Alpkan L. And Ergün, E., (2003). “Kültürel Boyutlar Olarak Đşletmelerde Đçsel Bütünleşme ve Dışsal Odaklanma
Düzeylerinin Performansa Etkileri”, Doğuş Üniversitesi Dergisi, 4 (1) , 55-70.
Lawrence G., (2006), “Promoting Sustainable Development: The Question of Governance”, Research in Rural Sociology
and Development, Book volume:11
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Informatics, 23, 191–200.
Manasse A. L., (1985), “Vision and Leadership: Paying Attention to Intention”, Peabody Journal of Education, Vol. 63, No.
1, pp. 150-173
Özdemir Đ., Osmanlı Toplumunda Çevre Anlayışı, Türkler, edt. H.C. Güzel-K. Çiçek, Ankara: Yeni Turkiye Yayınları, c. 10.
Öztuna Y.,(2004). Osmanlı Devleti Tarihi, Ötüken Yayınları, 2004, s.168
Senge, P.M.(2006), Beşinci Disiplin, 13. Baskı. (Çev.A. Đldeniz ve A. Doğulkan), Yapı Kredi Yayınları, Đstanbul.
Seyithanoğlu K., Büyük Đslam Tarihi, Çağ Yayınları, 1993
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109-130.
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Title
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The Relationship Between The Sustainable Development and the Vision of Nations: The Sample of Ottoman Empire
Author
Author
iBiCiOĞLU, Hasan
AK, Belma
ÇiFTÇi, Münire
GÖK, ibrahim Yasar
DERYA, Seher
Abstract
A summary of the resource.
A global, rapidly changing and advancing world of information age, states in terms of standing and resources to be effective, efficient and people have to use it to live in prosperity, especially in a state that is not strong in the universal space is a problem. Using resources effectively and efficiently be transferred to future generations to improve the quality of life with modern standards, requires a solid and consistent work. This study is one of the sustainable development of future generations to meet their own needs against the needs of our time while not restrict the ability. The conscious of joint action to ensure sustainable development has played a significant role. Individual interests and rant fight are the greatest obstacles in front of the sustainable development. This energy and expectations of individual should be canalized to common area. This area is the requests and the ideals of the nations. In terms of sustainable development, a picture of national requirements should be drawn and this picture is coherent and realistic, must be shown to the nation. That is; a nation vision should be created. Because nations are respected and strong at the rate of their national aims. The national aims are the dynamic power, the reason of unity and the resource of courage for nations. In this study, indicating mission and vision of the nations according to the sustainable development, it is highlighted from Ottoman Empire to the Turkish Repuclic by explaining the created visions and the mission perception that shaped the visions and achieved points in the end. With this study, we can conclude that there is a relationship between the mission perception of nations and visions which are improved by this perception and the mission perception with vision factor are the dynamics of the sustainable development. Key Words: Sustainable development, Vision, Ottoman Empire
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Relationship between Economic Growth and Human Capital:
An Empirical Analysis for Turkey
Mahmut ZORTUK
Dumlupınar Üniversitesi, ĐĐBF, Đktisat Bölümü, Kütahya, Türkiye
mzortuk@istanbul.edu.tr
Đbrahim BAKIRTAŞ
Dumlupınar Üniversitesi, ĐĐBF, Đktisat Bölümü, Kütahya, Türkiye
ibakirtas@dumlupinar.edu.tr
Serkan VARSAK
Bilecik Üniversitesi, ĐĐBF, Đktisat Bölümü, Bilecik, Türkiye
svarsak@bilecik.edutr
Abstract: The aim of this study is to explain the long and short run probable effects on the
economic growth of human capital. According to main hypothesis of research, as human
capital raises, the economic capital raises. In our analysis, human capital is defined with two
variables. These are school enrollment rate (SR) and education spending for each student
(ED). The growth rate is defined as real gross domestic product rate (GDP). The analysis
includes 1970-2008 term of Turkey. The main hypothesis is tested by the help of Bounds test
approach. According to the analysis results there are long run meaningful these are variables.
On the other hand, long run coefficients which are estimated by the help of the model are
meaningful but short run unmeaning. These are results is parallelisms between the literature
and the long run and short run coefficients symbols from the analysis results.
Keywords: Human Capital, Economic Growth, Time Series.
1. Introduction
Growth models which started with Keynes effect in 1930’s and frequently discussed till early 1950’s,
found base with Ricardo and that were brought alternative approach with Marx, has been pushed to background
in economic literature for 30 years until 1980’s. Although no general model has been reached about growth;
several studies have been made in growth literature by the addition of new economic factors.
Globalization in world economy rendered the production and usage of learning technology, qualified
labor power, and consequently the importance of human capital. Human capital is the only production factor that
could unite and use all other production factors and handle the possible problems that could occur in all other
production factors. For this reason, the formation targeted investments of developing countries gained
importance in order to realize the expected level of the economic growth. Human capital concept which is one of
the major sources of economic growth is being used to express all concepts such as {knowledge, ability, skills,
health condition, place in social relations and education level} (Kar ve Ağır, 2003).
Although classic economists like Adam Smith, J. Stuart Mill and Alfred Marshall first studied the
human capital concept, their opinions have been ignored by modern human capital theories. Later on, Denison,
Schultz and Becker; developed the human capital concept referring to Smith’s opinions and integrated it into
their analysis as one of the production factors such as physical capital. Studies included in economy literature,
has approved the hypothesis of “human capital needs investments just like economy needs physical capital
investments” (Kar ve Ağır, 2003).
Human capital build up is accepted as the most important factor in the achievement of the expected
growth and progress. Companies started giving more importance to personal training in order to exist, compete
and get along with the innovation. In the recent years, it is accepted that training achieves not only personal
development but also social and economical progress (Hoşgörür ve Gezgin, 2005). However, evoking of this
power depends on human capital and the support given to training of human capital. It is a resource; in breeding
of qualified labor power which is consistent with the needs of national economy, achievement of social order and
realization of economical growth at desired level by supporting the development of higher techniques (Wykstra,
1971).
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2. Literature
The impact of human capital on economic growth has been explained using Internal Growth Models
and Neo-classical Growth Theory. In the studies concerning this issue the impact of human capital on growth has
been measured using the impact of education, which is a measurable human capital indicator, on economic
growth. Other capital factors were not included in the analyses made and the studies have been based on the
relationship of education and growth (Atik, 2006).
The studies that formed the basis of neoclassical growth theory were carried out by Solow (1956) and
Swan (1956). In the studies based on Neo-classical economics theory, the impact of human capital factors on
economic growth was calculated using Cobb-Douglas production function. The function is given below.
Y t = AKt α Ht β Lt γ
(1)
In Equation (1), the following abbreviations were used; Y; Real income, A; External information, K; Physical
capital, H; Education, L; Labor force, α ; Physical Capital Elasticity of Production, β ; Educational elasticity,
γ ; Labor force elasticity, t; Time.
In the studies based on Cobb-Douglas production function, different indicators were used for education
variable. The most common indicators used are; school admission rates, graduation rates, average period of
education, educational expenses and the rate of schooling (Atik, 2006).
The first study belongs to Schultz (1960). Schultz, making use of the educational indicators in USA
between the years 1900–1956, reached the conclusion that all the GNP could not be accounted for by traditional
production factors. Schultz asserted that the unaccountable part comprises the variables incorporated to the
model under human capital indicators and the rise in the national product which was not accountable by the
traditional production factors could be explained by the labor force who are primary school, secondary school
and higher education graduates.
Nonneman and Vanhoudt (1996) made a generalization of Expanded Solow model in their study and
obtained a production function related to the model and used effective labor force as a variable. In the study
made by Nonneman and Vanhoudt using the economic growth rates of OECD member countries; only human
capital, technological knowledge oriented investments and their starting points were considered to be significant
and taken as explanatory variables. Through this study, Nonneman and Vanhoudt have reached the conclusion
that the major factors which affect economic growth in almost every economy, especially those of OECD
countries, are human capital and technological investments.
Denison (1962) investigated the relationship between average education period and economic growth
using the annual data pertaining to 1910–1960 period. The results of the analysis suggest that 23% of the
economic growth in the USA might be accounted for based on the increase in the level of education of the labor
force.
Another study which investigates the impact of human capital on economic growth was conducted by
Chuang (1999). In the study which investigated two major components of the impact of human capital on longterm economic growth, namely human capital accumulation and technological advancement processes, industrial
data from Taiwan were taken as the basis. According to the findings of this study; 7% of the 29% increase in
total production can be explained by the increase in levels of education.
Schultz (1999) who studied the relationship between economic growth and individual capital stressed
that health and education investments not only bring individual benefits but also are important for economic
growth. The investments in the fields of education and health in the African continent which is considered to be
underdeveloped in education and health services have been assessed and the impact of the scarcity of investment
in these fields on economy was evaluated. Schultz has, in view of the series used for obtaining data, reached the
conclusion that education and health services in African countries positively effect economic growth.
Another study which investigates the impact of human capital on economic growth was conducted by
Rangazas (2000). In his study, which uses the data pertaining to the USA for the period from 1870 to 1970, he
has investigated the impact of human capital on economic growth. Rangazas divided the labor factor into human
capital and unskilled labor force. According to the findings of the study, the growth rate realized as 9,3% from
1870 to 1970 might be accounted for as 20% by physical capital, 6,7% by human capital, and 69% by labor
force. Moreover, it has also been concluded that educated labor factor increases the strength of physical capital
in defining the increase in growth.
Romer (1986) and Lucas (1988) have laid the foundations of internal growth theories. In internal growth
models human capital accumulation creates positive externalities and has a positive effect on economic growth.
Internal growth models try to make up for the deficiencies of the Cobb-Douglas type production function.
Internal growth models include the impact of human capital on production factors and total factor productivity in
the analysis. The production function used in internal growth models is as follows (Atik, 2006):
Y=A(H) F(H,L,R,A)
(2)
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
In the equation (2), the following abbreviations are used Y income, A(H): technology internalized
during education, H education, L unskilled labor force, R: R&D, and A technological knowledge.
In Barro (1991)’s study which explains the relationship between human capital and economic growth,
the increase in the real value of the per capita GNP of 98 countries in the time period covering 1960-1985 has a
positive relationship with initial human capital (according to 1960 school records) yet displays a negative
relationship with the initial value of the GNP. Countries that have larger human capitals also display a lower
birth rate. Growth is in inverse proportion with the expenditures of government in GNP. Other important
findings include the positive correlation between growth rates and political stability and the negative correlation
of the growth rates with negative macroeconomic indicators of the market.
Wolff and Gittleman (1993) have defined the human capital variable as school admission rates and
investigated the impact of human capital on economic growth. The impact of education on labor force has been
analyzed in the study. As a result of the analyses it has been asserted that admission to higher education rates
increase labor productivity.
Tallman and Wang (1994) investigated whether or not the human capital was the source of growth in
Taiwanese economy using the data pertaining to the period 1965-1989. Tallman and Wang based their study on
Lucas-Romer type internal growth model. The most important assumption of the model appears as human capital
has a fixed yield. The findings of the study suggest that human capital factors effect the labor force in Taiwan
and account for 40% of the economy and human capital is an important factor that enhances the productivity of
technology and labor force.
Benhabib and Spiegel (1994), through the model they have built in their study, have studied the
adaptation speed of human capital to technological developments in 121 developed and developing countries
using the panel data pertaining to 1965-1985 period and they have tested the hypothesis “human capital effects
the physical capital productivity and increases total factor productivity”. They have obtained the result that
human capital as a production factor has a negative effect on economic growth. However, as a result of the
analysis they have made they concluded that human capital has an indirect impact on economic growth rather
than a direct one.
Coe, Helpman and Hofmaister (1997) have taken average education period as the human capital
variable. They have explained the impact of human capital on economic growth for 77 countries covering the
time period from 1971 to 1990 in their study. According to the obtained findings, those developing countries
which have high levels of education and research and development expenditures acquire positive externalities
from the trade with developed countries and have an increase in the productivity of production factors as they
produce new technologies.
Einarsson and Marquis (1998), on the other hand; adapted the Lucas model to the real business cycles
and searched for the influence of human capital on economical growth of the USA. In this study performed using
the annual data of the years from 1950 to 1989, they reached the conclusion that the rate of human capital growth
was slower than that of physical capital growth and that its influence on economical growth was less strong
compared to that of the physical capital.
Erk, Çubuk and Ateş (1998), studied on accumulation of physical capital and human capital and also
their long run effects on economical growth. In this study they established three alternative models and applied
them on 45 developing countries. Moreover, making use of the results of this study the reason for why the
developed countries have lower long term growth coefficients compared to the under-developed countries was
searched for. In the first model established they used the data pertaining to the 45 countries selected covering the
period between the years 1960-1990 and these data revealed that the slope rates that give unit change rates of
human capital and physical capital are high for the developed countries and low for the developing ones.
Another study focusing on theoretical approaches concerning human capital and production
technologies belongs to Park (2004), who manipulates effects of economic growth on distribution of population
as for human capital, considering educational success levels. Here, using the data pertaining to some developing
and developed countries collected in five- year-periods between the years 1960 and 1995, it was concluded that
human capital distribution has a positive interaction with growth.
Tunç (1993) in a study, searched for the contribution of schooling rate to the economic growth of
Turkey using the annual data pertaining to 1968-1995 and simple regression method. According to the regression
results the influence of secondary school schooling rates was determined to be 40%, while higher education
schooling rate had a contribution of 0,09%. Furthermore, the study has shown that there is a close relationship
between the development levels of the countries and the educational levels of the labor force in economy.
Ateş (1998), on the other hand, using the annual data pertaining to 1960-1994 period in Turkey,
analyzed the capacity of extended Solow model with human capital to explain economic growth. Ateş reached
the conclusion that the capacity to explain the changes in economic growth is higher in extended Solow model
with human capital compared to the non-extended Solow model.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The common point of the all studies is that long term economic growth of the countries that care about
human capital accumulation beside the other production factors is larger compared to that of the other countries
(Gümüş, 2004: 159). Moreover, the main subject of these studies is economic development. Because the most
important factor was deemed to be economic growth in realization phase of economic development, the studies
were analyzed around the axis of growth.
3.Data and Methodology
This study examines the plausible impacts of human development on the economic growth in the light
of hypotheses by using annual date for 1970-2008. For the model in which real gross national product (GNP) is
dependent variable we use two independent variables, namely; school enrollment rate (SR) and educational
expenditure per student (EDE). SR is defined as simple mean values of the rates of primary education, secondary
education and higher education. GNP data are from State Planning Organization (DTP), EDE data are from
Ministry of Education (MEB), and SR data are from database of World Development Indicators (WDI). In our
analyses we use the logarithmic values of GNP, EDE, SR. The model is as follows:
ln GNPt = α 0 + α 1 ln EDEt + α 2 ln SRt + u t
(3)
To implement the bounds test let us define a vector of two variables, zt , where zt =
( y t , xt' )' , yt is the
dependent variable and xt is a vector of regressors. The data generating process of zt is a p-order vector
autoregression. For cointegration analysis it is essential that ∆ yt be modelled as a conditional error correction
model (CECM);
p
q
i =1
j =0
∆y t = c0 + π yy y t −1 + π yx. x xt −1 + ∑ ϑi ∆y t −i + ∑ φ 'j ∆xt − j + θω t + µ t
(4)
Here, πyy and πyx.x are long-run multipliers. co is the constant and ωt is a vector of exogenous
components, e.g dummy variables. Lagged values of ∆yt and current and lagged values of ∆xt are used the model
the short-run dymamic structure and µ t is error term. The bounds testing procedure for the absence of any level
relationship between yt and xt is through exclusion of the lagged levels variables yt-1 and xt-1 in Equation 4. It
follows, then, that our test for the absence of a conditional level relationship between yt and xt entails the
following null and alternative hypotheses:
H0; πyy = 0, πyx.x=0' ,
Hl; πyy ≠ 0, πyx.x ≠ 0' veya πyy ≠ 0,
πyx.x= 0' ya da πyy = 0, πyx.x ≠ 0'
Peseran et.al.(2001) generated two sets of critical values assuming that both regressors are I(1) and both
are I(0). While the critical values are reported in Pesaran and Pesaran (1997) and Pesaran et al. (2001), they are
generated for sample sizes of 500 observations and 1000 observations and 20 000 and 40 000 replications,
respectively. The F Statistic that has a non-standart distiribution, depends upon; (i) whether the ARDL model
contains an intercept and/or a trend, (ii) the number of regressors, (iii) whether variables included in the ARDL
model are I(0) or I(1). If the calculated F statistic is higher than the upper critical value, I(1), the null hypothesis
of no long-run relationship can be rejected without knowing the order of integration of the regressors.
Alternatively, if calculated F statistic is smaller than the lower critical value, I(0), the null hypothesis is accepted
without knowing the order of integration of the regressors. When the test statistic falls inside the upper and
lower critical value, a conclusive inference cannot be made. Then, we must know the order of integration of
variables, I(d), for any conclusion can be drawn.
There are different advantages of the bounds testing approach that motivates us in our work. This
procedure can be applied to models irrespective of whether the variables are I(0) or I(1). This is unlike other
popular cointegration techniques such as the Engle and Granger (1987), Johansen and Juselius (1990) and, which
require pre-testing the variables to determine their order of integration. (Pesaran and Pesaran, 1997)
Other advantage of bounds testing for this work that the method can be applied in case in which data
set is of small sample sizes, such as a in the present study. Narayan(2005) show that the bounds testing approach
to cointegration is popular in small sample sizes.
In addition to the tis advantages the bounds test, the Engle-Granger Method the Unrestricted Error
Correction Model does not push the short run dynamics into the residual terms. Thus, the ARDL approach,
because it draws upon the Unrestricted Error Correction Model has better statistical properties than the EngleGranger cointegration test (Benarjee et.al., 1998)
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The UECM for equation (1) can be written as below:
n
n
n
i =1
i =0
i =0
∆ ln GNPt = a 0 + ∑ a1i ∆ ln GNPt −i + ∑ a 2i ∆ ln EDE t −i + ∑ a3i ∆ ln SRt −i
+ a 4 ln GNPt −1 + a 5 ln EDEt −1 + a 6 ln SRt −1 + a 7 DUM + et
(5)
where, ∆lnGNP, ∆lnEDE and ∆lnSR are first difference of the logarithms of real domestic income
(lnGNP), real education expenditure (lnEDE), and school rate (lnSR) respectively. We include a dummy variable
to account for structural break. DUM is dummy variable that indicates the beginning of eight-year basic
education in Turkey in 1997. The dummy variable is defined by:
DUM =
1
If t = 1997-2008
0
otherwise
4. Empirical Results
The ADF and PP test the null of a unit root against the alternative of stationary. We allow both intercept
and intercept with trends in the testing. As shown in Table 1, the testing results are mixed. Since none of the
variables are integrated at an order higher than one, this allows the use of the ARDL bounds procedure.
Table 1.Test results for unit roots
lnGNP
∆lnGNP
lnEDE ∆lnEDE
lnSR ∆lnSR
ADFa intercept
0.37(0)
-6.48(1)*
0.32(2) -3.34(1)* 0.17(1) 3.96(1)*
intercept and trend
-2.17(0)
-6.42(0)*
-1.09(2) -3.37(1)* -2.11(0) -4.07(0)*
PPb intercept
0.08(2)
-6.48(0)*
0.52(0) -4.87(3)
0.32(1) 4.05(1)*
intercept and trend
-2.67(0)
-6.42(0)*
-1.13(1) -5.10(2)* -1.79(1) -4.08(1)*
Notes: aH0: the series has a unit root. AIC is used to select the lag length. The maximum number of lags is set to be four. bH0:
the series has a unit root. Barlett–Kernel is used as the spectral estimation method. The bandwidth is selected using Newey–
West method. *, indicate 1% level of significance. The optimal lag length or bandwidth is indicated in the parentheses.
The calculated F-statistic together with the critical values are reported in Table 2. The calculated Fstatistic (Wald test), that necessary for testing the presence of cointegration relation among the variables of
equation (2). When real GNP is the dependent variable, the calculated F- statistic is
FRGNP(RGNP|REDE,RSR)=7.6127 (Prob:0.002). This value higher than the upper bond critical value of 6.36 at
the %1 level. The result suggest that the null hypothesis of no long-run relationship can be rejected. A maximum
of 2 lags was used for the model. The estimated model presented here is based on the Schwarz Bayesian
Criterion. The long-run and short-run results are presented in Tables 3.
Cusum and Cusum of Squares tests proposed by Brown et al. (1975) are used in testing for constancy of
the long-run parameters. As seen from Figure 1, Cusum and Cusum of Squares tests statistics are inside the 95%
confidence interval. This result shows that applied Cusum and Cusum of Squares tests clearly indicate stability
of the estimated parameters of the CECM during the sample period. In addition to this Figure 1 was subjected to
a number of diagnostic tests, including test of autocorrelation, normality and heteroskedasticity in the error
stability term. We found no evidence of autocorrelation in the disturbance of the error term. The estimated model
passes the Jarque-Berra normality tests, suggesting that the errors are normally distributed and the Ramsey-Reset
test indicates that the model is correctly specified while according to the ARCH test, there is no problem of
heteroskedasticity.
Table 2. Cointegration Test Results (Critical value Bounds of the F -statistic: Unrest’d intercepts and no trends)
90% level
95% level
99% level
k
I(0)
2
3.17
Calculated F-statistic
FRGNP(RGNP|REDE,RSR)
I(1)
4.14
I(0)
3.79
I(1)
4.85
I(0)
5.15
I(1)
6.36
7.6127 (Prob:0.002)
Note: The critical value are extracted Peseran et. al. Table CI(iii) Case III and k: The number of explanatory
variables.
lnEDE
lnSR
Table 3. Estimated Short-Run and Long-Run Elasticity’s UECM
Short-run
Long-run
-0.02 (Prob: 0.1497)
0.022 (Prob: 0.0042)
-0.13 (Prob: 0.2123)
0.40 (Prob: 0.0025)
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
*The long run coefficient of DUM variable is calculated to be 0.95 (Prob: 0.031).
12
1.6
8
1.2
4
0.8
0
0.4
-4
0.0
-8
-12
-0.4
1994
1996
1998
CUSUM
2000
2002
2004
2006
5% Significance
2008
1994
1996
1998
2000
CUSUM of Squares
2002
2004
2006
2008
5% Significance
Jarque-Bera:1.61 (Prob:0.44), Ramsey Reset[1]: 2.49 (Prob:0.13), Ramsey Reset[2]: 1.97 (Prob:0.19) Breusch-Godfrey, LM
test[1]: 0.42 (Prob:0.53), LM test[2]: 0.21 (Prob:0.80), ARCH test[1]:0.02 (Prob:0.87), ARCH test[2]:0.49 (Prob:0.61)
ARCH test[3]:0.33 (Prob:0.79).
Figure 1. Plots of Cusum Cusum of Squares and Diagnostic tests for the estimated UECM
5. Conclusion and Policy Implication
Studies started in 1950’s which human capital concept up to nowadays, are measuring the relationship
between growth and progress of domestic economies and education level of the society and moreover effect of
education on increase in average per capital income and accordingly rise in national income. Studies on
determination of schooling rates and education expenses and their economical effects; stated that there is a
positive relation between education and personal income. Additionally, continuing studies showed that as
schooling rate and education period increase, the personal income increases faster, personal income raise could
be explained with the raise in personal education, education expenses have positive effect on income distribution
and domestic education expense levels have linear relation with development levels.
By the advantage of this fundamental knowledge and rich literature, a long term statistical meaningful
relation has been found between schooling rates, educational expense per student and real gross national
expenditure growth rate variables and variables derived from the results of Bounds test approach which were
carried on between 1970 and 2008 in Turkey. While model based predicted long term coefficients are said to be
meaningful, short term coefficients are found meaningless. At the end of the analysis, it was seen that long and
short term coefficient signs derived from the analysis are parallel to the literature.
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Title
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The Relationship between Economic Growth and Human Capital: An Empirical Analysis for Turkey
Author
Author
ZORTUK, Mahmut
BAKIRTAS, ibrahim
VARSAK, Serkan
Abstract
A summary of the resource.
The aim of this study is to explain the long and short run probable effects on the economic growth of human capital. According to main hypothesis of research, as human capital raises, the economic capital raises. In our analysis, human capital is defined with two variables. These are school enrollment rate (SR) and education spending for each student (ED). The growth rate is defined as real gross domestic product rate (GDP). The analysis includes 1970-2008 term of Turkey. The main hypothesis is tested by the help of Bounds test approach. According to the analysis results there are long run meaningful these are variables. On the other hand, long run coefficients which are estimated by the help of the model are meaningful but short run unmeaning. These are results is parallelisms between the literature and the long run and short run coefficients symbols from the analysis results.
Date
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2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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https://omeka.ibu.edu.ba/files/original/ca864cf69562c308873bf60df189a1ed.pdf
190cbefc1b2bc6797993c990e2dfe798
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Analysing Business Competition by Using AHP Weighted TOPSIS
Method: An Example of Turkish Domestic Aviation Industry
Halil ZAĐM
Faculty of Economics and Administrative Sciences, Fatih University, Istanbul,
halilzaim@fatih.edu.tr
Mehmet ŞANAL
Faculty of Economics and Administrative Sciences, Fatih University, Istanbul,
msanal@fatih.edu.tr
Nuri Gökhan TORLAK
Faculty of Economics and Administrative Sciences, Fatih University, Istanbul,
gtorlak@fatih.edu.tr
Selim ZAĐM
Faculty of Economics and Administrative Sciences, Fatih University, Istanbul,
szaim@fatih.edu.tr
Abstract: The article uses AHP weighted TOPSIS multi-methodological approach in the
Turkish domestic aviation industry. It starts by describing exceedingly complex nature of
competition in the sector. Then, it deals with the constituent parts of the research
methodology and the eclectic approach itself. The implementation of AHP weighted
TOPSIS method reveals the ranking of major air carriers in light of key success variables
in the sector.
Keywords: strategy, AHP weighted TOPSIS, multi-methodology, TOPSIS.
1. Introduction
The purpose of this article is to apply AHP weighted TOPSIS approach to the Turkish domestic
aviation sector in order to rank air carriers according to their relative closeness coefficient on the basis of
criteria that are most critical to success and prosperity in the industry. This analysis provides useful information
for airline companies about evaluating their objectives and strategies. To reach this end, in the first section the
article initially describes the nature of rising competition in the Turkish domestic aviation industry that became
a menace to the survival of firms during the period 2003-2007 as well as provides brief information about the
chief characteristics of major domestic air carriers in the sector. The next section, called background
information about research methodology, explains AHP weighted TOPSIS method, namely analytic hierarchy
process (AHP) method, and the traditional TOPSIS method, and then proposed AHP weighted TOPSIS method.
We assume that this multi-methodological AHP weighted TOPSIS approach with its wide-ranging applications
meet the requirements of survival volatile environments like aviation industry Then the following section,
called the application of the AHP weighted TOPSIS method, undertakes a real industry case from a comparative
perspective that provides full and invaluable data for airline companies in the sector so that they should review
their goals, strategies, plans, and programmes. Conclusion is provided in the final section.
2. The Nature of Turkish Domestic Aviation Industry
Although the Turkish aviation sector has been negatively affected by the political and financial crises,
it has continued its progress in the long term with the growth of economy, liberalisation, globalisation,
developing international trade, lowering prices, and expanding service net. This sector’s climax was the terrorist
attack in 9/11 2001 in the U.S. The aviation sector was globally harmed due to this attack that gave rise to the
bankruptcy of some prominent airline companies. While the aviation sector was trying to recover itself, it was
damaged again by Gulf War and SARS illness in the Far East Asia in 2003. But, Iraqi War was shorter than
expected and SARS was taken under control, so aviation sector got into growing trend in 2004.
The high performance of the Turkish economy in recent years, the rising numbers of tourists coming to
Turkey, the lower prices of the private airline companies after the tax cut on flight prices in 2004 accelerated the
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Turkish aviation transportation to the sector. Though the domestic passenger number was 8, 7 million in 2002, it
rose to nearly 20 million in 2005. This number was 38 percent more than the number in 2004.
By 2006, the Turkish aviation sector had 204 passenger planes, 24 cargo planes and capacity of 38
thousand passengers. Although the Turkish Airlines had domestic flights from two airports to 25 scheduled
domestic points in 2003, the flights today are from seven airports by five airline companies to 38 points. If we
bear in mind the Turkey’s advantageous geographical condition, interregional trade development, and the
improvement efforts in tourism, the Turkish aviation sector which has a current growing trend is expected to
continue its expansion process.
Turkey due to its geographical location acts like a point of passing between Europe, Middle East, and
Asia. Improvements in recent years as well as Turkey’s liberal policies and bilateral agreements have turned
this hectic geographical area to a special centre for passenger and cargo transportation.
However there are still 70 idle airports nationwide that can be opened to air traffic in Turkey. In
particular, in the East part of Turkey the number of unused airports is high due to the topographic structure of
this region. In a short time, the increasing need for air transportation would bring these airports in use and
provide important benefits for Turkey.
In terms of competition in the Turkish Domestic Air Transportation after the privatisation of Turkish
Airlines in 2003 the number of passengers in Domestic Air Transportation was noticeably increased. This led to
new air carriers enter the aviation sector and the competition became severe. The slogan of “Every Turk will try
plane at least once” became popular in the Domestic Air Transportation. In relation with the incentive policy to
make the domestic flights attractive and to bring activity to regional airports there has been a reduction in
DHMI (Government Airport Service) tariffs, and a cut in private communication tax. Furthermore, the Ministry
of Transport abolished the education contribution pay in 2003 and gave authorisation of domestic flights to the
private airline companies. With this practice a couple of new carriers such as Fly Air, Onur Air, Pegasus
Airlines, and Atlas Jet entered the market. As a consequence, a sudden change and a cutthroat competition
developed in the sector. This increased the number of domestic passengers (Table 1). Private firms increased
domestic flights by taking their licenses. Onur Air, Pegasus Airlines, and Atlas Jet became initial firms that took
their licenses.
Rank
1
2
3
4
Table 1: Number of Domestic Passenger Carried in 2006
Companies
Number of Passenger
Turkish Airlines
8.857.000
Onur Air
4.400.267
Atlas Jet
2.982.712
Pegasus
1.818.989
3. Background Information about Research Methodology
This section briefly describes the analytic hierarchy process (AHP) technique, and the TOPSIS
method, and proposed AHP weighted TOPSIS method.
3.1. The Analytic Hierarchy Process (AHP) Methodology
The analytic hierarchy process (AHP) methodology, which was developed by Saaty (1980), is a
powerful tool in solving complex decision problems. The AHP helps the analysts to organize the critical aspects
of a problem into a hierarchical structure similar to a family tree. By reducing complex decisions to a series of
simple comparisons and rankings, then synthesizing the results, the AHP not only helps the analysts to arrive at
the best decision, but also provides a clear rationale for the choices made (Chin et al., 1999). In AHP approach,
the decision-maker is required to provide his preferences by pairwise comparisons, with respect to the weights
and scores (Chu and Lin, 2003).
3.2. The TOPSIS Method
TOPSIS method is a technique for order preference by similarity to ideal solution (Hwang and Yoon,
1981). The ideal solution (also called positive ideal solution) is a solution that maximizes the benefit
criteria/attributes and minimizes the cost criteria/attributes, whereas the negative ideal solution (also called antiideal solution) maximizes the cost criteria/attributes and minimizes the benefit criteria/attributes. The so-called
benefit criteria/attributes are those for maximization, while the cost criteria/attributes are those for minimization
(Bellman and Zadeh, 1970). The best alternative is the one, which is closest to the ideal solution and farthest
from the negative ideal solution.
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3.3. The Proposed AHP Weighted TOPSIS Method
The basic steps of proposed AHP weighted TOPSIS method can be described as follows:
Step 1. In the first step, a panel of decision makers (DMs) who are knowledgeable about airline selection and
evaluation process is established. In a group that has K decision-makers (i.e. D1, D2, ..., Dk) are responsible for
developing the hierarchical structure of the airline evaluation and selection. Then, using AHP technique, the
normalized weights for each evaluation and selection criterion are determined.
Step 2. In the second step, DMs evaluate the performance of each airline company with respect to each criterion
to obtain a decision matrix.
x11
x
X = 21
...
xm1
x12
x22
...
xm 2
... x1n
... x2 n
... ...
... xmn
Step 3. After forming the decision matrix, normalized decision matrix is obtained as:
r11 r12
r
r
R = 21 22
... ...
rm1 rm 2
... r1n
... r2 n
... ...
... rmn
Step 4. The weighted normalized decision matrix is computed by multiplying the importance weight of
evaluation criteria and the values in the normalized decision matrix.
Step 5. Then positive and negative ideal solutions are determined.
Step 6. Then the distance of each alternative from positive and negative ideal solutions are calculated.
Step 7. Then the closeness coefficient CC is determined.
4. The Application of AHP Weighted TOPSIS Method
The application of the proposed algorithm is explained in the following steps.
Step 1. In the first stage, a panel of ten DMs from various departments including purchasing, quality, and
production and planning who are involved in Strategy process was formed. Based on semi-structured interviews
with DMs, a list of nine Strategy Process criteria was generated. These criteria are related to various aspect of
strategy ranging from Advertising Product Quality, Price Competitiveness, Customer Loyalty, Market Share,
Customer Service, E-commerce, Management Experience, and Branding. The DMs were then asked to specify
the relative importance of airline selection criteria using pairwise comparison scale. Then normalized weights
for each criterion were obtained. These values are shown in Table 2.
Table 2: Normalized Weights for each Evaluation Criteria
standart
Advertising
0.0417
Product Quality
0.2584
Price Competitiveness
0.1499
Customer Loyalty
0.1555
Market Share
0.0551
Customer Service
0.1396
E-commerce
0.0249
Management Experience
0.0981
Branding
0.0767
Total
1.0000
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Step 2: In this step, we measure the performance of firms with respect to each strategy criterion. Table 3 shows
the decision matrix of selection criteria.
Table 3: Decision Matrix
Advertising
Product
Quality
Price
Competitiveness
Customer
Loyalty
Market
Share
Customer
Service
Ecommerce
Management
Experience
Branding
THY
5
5
3
4
5
5
5
5
5
Onur Air
2
2
4
2
3
1
3
2
1
Pegasus
3
3
5
3
4
3
4
4
3
Atlasjet
3
3
4
2
3
2
3
2
1
Step 3: In this stage, normalized decision matrix is obtained depending on whether the objective of selection
criterion is that of minimization or maximization. Table 4 shows the normalized decision matrix.
Table 4: Normalized Decision Matrix
Turkish Airlines
Onur Air
Pegasus
Atlasjet
max
max
max
max
max
max
max
max
max
Advertising
Product
Quality
Price
Competitiveness
Customer
Loyalty
Market
Share
Customer
Service
Ecommerce
Management
Experience
Branding
0.7293
0.2917
0.4376
0.4376
0.7293
0.2917
0.4376
0.4376
0.3693
0.4924
0.6155
0.4924
0.6963
0.3482
0.5222
0.3482
0.6509
0.3906
0.5208
0.3906
0.8006
0.1601
0.4804
0.3203
0.6509
0.3906
0.5208
0.3906
0.7143
0.2857
0.5714
0.2857
0.8333
0.1667
0.5000
0.1667
Step 4: Then weighted normalized decision matrix is calculated. The weighted normalized decision matrix for
each selection criterion is shown in Table 5.
Table 5: Weighted Normalized Decision Matrix
THY
Onur Air
Pegasus
Atlasjet
Advertising
Product
Quality
Price
Competitiveness
Customer
Loyalty
Market
Share
Customer
Service
Ecommerce
Management
Experience
Branding
0.0304
0.0122
0.0183
0.0183
0.1885
0.0754
0.1131
0.1131
0.0554
0.0738
0.0923
0.0738
0.1083
0.0541
0.0812
0.0541
0.0359
0.0215
0.0287
0.0215
0.1117
0.0223
0.0670
0.0447
0.0162
0.0097
0.0130
0.0097
0.0701
0.0280
0.0561
0.0280
0.0639
0.0128
0.0384
0.0128
Step 5 and Step 6: The positive and negative ideal solutions are determined. Table 6 and 7 show the ideal
solutions.
Table 6: Positive Ideal Solution and its Distance for Each Alternative
THY
Onur Air
Pegasus
Atlasjet
Advertising
Product
Quality
Price
Competitiveness
Customer
Loyalty
Market
Share
Customer
Service
Ecommerce
Management
Experience
Branding
0.0000
-0.0183
-0.0122
-0.0122
0.0000
-0.1131
-0.0754
-0.0754
-0.0369
-0.0185
0.0000
-0.0185
0.0000
-0.0541
-0.0271
-0.0541
0.0000
-0.0144
-0.0072
-0.0144
0.0000
-0.0894
-0.0447
-0.0670
0.0000
-0.0065
-0.0032
-0.0065
0.0000
-0.0421
-0.0140
-0.0421
0.0000
-0.0511
-0.0256
-0.0511
Step 7: The closeness coefficient CC is determined. As initial average weights were used in the TOPSIS
calculations, the values of CC in Table 8 are considered as crisp TOPSIS results.
Table 7: Negative Ideal Solution and its Distance for Each Alternative
THY
Onur Air
Pegasus
Atlasjet
210
Advertising
Product
Quality
Price
Competitiveness
Customer
Loyalty
Market
Share
Customer
Service
Ecommerce
Management
Experience
Branding
0.0183
0.0000
0.0061
0.0061
0.1131
0.0000
0.0377
0.0377
0.0000
0.0185
0.0369
0.0185
0.0541
0.0000
0.0271
0.0000
0.0144
0.0000
0.0072
0.0000
0.0894
0.0000
0.0447
0.0223
0.0065
0.0000
0.0032
0.0000
0.0421
0.0000
0.0280
0.0000
0.0511
0.0000
0.0256
0.0000
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Table 8: Computations of AHP Weighted TOPSIS Method (CC)
Firm
CC
THY
Onur Air
Pegasus
Atlasjet
0.8211
0.0977
0.4631
0.2620
5. Conclusion
In this study, the AHP weighted TOPSIS methodology has been employed as an alternative to the conventional
TOPSIS approach. When AHP weighted TOPSIS approach has been implemented, the Turkish Airlines has
been identified as the most suitable company, Pegasus the runner-up, Atlasjet the third, and Onur Air the fourth
(Table 8). This research finding indicated that the Turkish Airlines preserved its dominant role even after its
privatization and new entrants in the domestic airline industry. It is worthy of noting that Pegasus though newly
founded air carrier could intensify the competition in the sector and become a serious rival for the Turkish
Airlines in the coming years.
References
Bellman, B.E., Zadeh, L.A. (1970). Decision-making in a fuzzy environment. Management Science 17 (4), 141–164.
Chin, K. S., Chiu, S. , Tummala, V. M. R. (1999). An evaluation of success factors using the AHP to implement ISO
14001- based ESM, International Journal of Quality & Reliability Management, 16, 4, pp. 341-361.
Chu, T. C., & Lin, Y. C. (2003). A fuzzy TOPSIS method for robot selection. The International Journal of Advanced
Manufacturing Technology, 21, 284–290.
Hwang, C.L. and Yoon, K. (1981). Multiple Attribute Decision Making: Methods and Applications. Berlin: Springer
Saaty, T.L. (1980). The Analytical Hierarchy Process. Mc. Graw-Hill, New York, NY.
211
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Analysing Business Competition by Using AHP Weighted TOPSIS Method: An Example of Turkish Domestic Aviation Industry
Author
Author
ZAİM, Halil
ŞANAL, Mehmet
TORLAK, Nuri Gökhan
ZAİM, Selim
Abstract
A summary of the resource.
The article uses AHP weighted TOPSIS multi-methodological approach in the Turkish domestic aviation industry. It starts by describing exceedingly complex nature of competition in the sector. Then, it deals with the constituent parts of the research methodology and the eclectic approach itself. The implementation of AHP weighted TOPSIS method reveals the ranking of major air carriers in light of key success variables in the sector
Date
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2009-06
Keywords
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PeerReviewed
HB Economic Theory
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https://omeka.ibu.edu.ba/files/original/05bd8d9bf6ed0aa513d6b80b74c8e707.pdf
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Comparative Analysis of Economic and Social Performances of
Transition Economies and the Case of Bosnia-Herzegovina1
Đbrahim Güran YUMUŞAK
Asst. Prof., PhD. Kocaeli University Department of Economics
iyumusak@kocaeli.edu.tr
Mahmut BĐLEN
Asst. Prof., PhD. Sakarya University Department of Economics
mbilen@sakarya.edu.tr
Abstract: Transition economies have undergone an enormous transformation since 19891991. After the recession of the early 1990’s, some of these economies experienced a GDP
recovery, at a different pace, with different outcomes in terms of economic growth and social
performance (human development, employment, poverty, etc.). This paper tries to analyze the
level of human capital for Transition Economies by comparative methods. In order to analyze
level of human capital for Transition Economies, we used the human development indexes.
Transition economies progress in the transition process has different effects due to internal and
external factors. The human development level in transition economies is relatively high in
spite of a huge recession and very poor economic performance, thanks to previous investments
made in social dimensions by previous regimes. In fact, economic performance would suggest
worse human development levels. Nevertheless, the transition process influenced the nonincome dimensions of people, often worsening the main indicators. Among the countries of
Central and Eastern Europe, Bosnia and Herzegovina is the ninth position as far as HDI rank
is concerned, just above Macedonia and Albania. BiH in aggregate human development terms
is continuing to progress. Its HDI score now places it at the lower band of the most developed
countries in the world.
Key Words: Human Capital, Human Development, Transition Economies, BosniaHerzegovina
Introduction
After the collapse of the Soviet, Countries belongs to the Socialist economic system has tried to change
the production and trade forms of economy fundamentally from the socialist to open economy. These economies
need to structure of property and the consumer and producer of behavior a well for change in the encounter. The
countries economic structures defined as transition economy. The countries in the transition process get attention
due to several reasons by the researchers. This study tries to analyze the transition characteristic of the economy
of the South East European Countries’ human and social development levels, the human and social development
and economic development relationship. Therefore, this study aims to compare the transition economies of the
human development levels in comparison analysis. In this goal, transition economies of education rate,
enrolment ratio, the average life expectancy and people per capita are used to reach human and social
development index values of using the for analysis. Thus, the countries’ economic development human capital
potential has been determined. Although, income shows economic development levels for countries, income,
health and the quality of should be the taken into consideration on the basis of the examination.
As we know that The United Nations Development Organization publishes every year in a Human
Development index (Human Development INDEX-HDI) since 1990, this index not only shows the qualitative
change but also in terms of quality that functions as a scale of an important indicator. This index covers
economic performance, human and social development, the education and health indicators.
This study proceed as follows: The first section gives the properties of transition economies, features
economic performance and the relationship between the human and social development. The second section
explains the human capital and the concept of human and social development index. The third section examines
the transition economies’ levels in human and Social Development index.
1
This paper based on “The Comperative Analysis of Levels of Human Development Levels of Transition Economies”
presented at the Karamanoglu Mehmetbey University Journal of Economic and Administrative Sciences Faculty and “The
Comperative Analysis of Levels of Human Development of Middle Asia Turkish States And Turkey” II. International
Social Scientists Congress, Bishkek, 22-24 October 2008.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
1. Transition Economies and Economic-Social Performance
Transition economies have undergone an enormous transformation since 1989-1991. After the recession
of the early 1990’s, some of these economies experienced a GDP recovery, at a different pace, with different
outcomes in terms of economic growth and social performance (Tridico, 2005:1). After the collapse the bloc's
Socialist in 1989, these countries has increased their effort to transforming economic systems. Countries are
living this transition process from central plan economy to free market economy economic structures defined as
“Transition Economy”. Even though these countries are classified in different group for several criteria, these
countries classified as the geographical and their union categorical : Central and Eastern European Countries and
the Baltic Countries (The Czech Republic, Poland, Lithuania, and others), South -East European Countries
(Romania, Bosnia and Herzegovina, Albania, and others) and the Commonwealth of Independent States
(Georgia, Ukraine, Azerbaijan, and others).
1.1. Economic-Social Performance
Transition from central plan economy to free market economy is a tough process and fundamental
reforms are required. Institutional structure with the social norms, the institutions which fails powers and values
ties between should be transformed (Tridico, 2005:2). This transformation, transition economies the current
economic problems increased problem and makes difficult transition. In the early 1990s, Central and Eastern
European Countries and the Commonwealth of Independent States member of the countries in economic
wreckage, poverty, have increased its income distribution changed and unemployment rates increased.
In particular The Former Soviet Union countries of the people living life standards are getting worse.
This situation in countries market economy transition process is lame and that it put faith in the adverse effect.
New economic order and relations, the establishment of the development of perceptions of people depends on
the changing.
Transforming economy from the planned economy to the market economy involves many social costs.
There are several reasons. These reasons are: there is no social security guarantees in market economy, it does
not personal prosperity of the education and health services focus on economic productivity and competition, the
budget deficit will decrease social services performed. Even though, the transition economies show different
characteristics, they have some similar properties. The properties; some of the state administration with a
relatively flexibility at a distance but is strong, public sector to be great, underdeveloped corporate infrastructure,
the problem is poverty to be widely (UNDP, 2005a:16).
In addition to these, due to the lack of infrastructure crime fed its height is that a bribe with problem
also serious fundamental problems with is among them. These problems are important barriers for the
development of the market economy. This claims to the contrary the countries in another feature, human capital
and social the most important factor in the education of the infrastructure in the field of the very strong. The
economy of Transition process the countries of the economic structures and the situations is significantly differ
from the. The Baltic countries and among the Balkan countries, there are differences between Turk Republics
and the Central European countries.
Table 1: Transition Economies and Economic Performances USD
Central Eastern Europe – The Baltic
Commonwealth of Independent States
South Eastern Europe
States
(CIS)
Annual
PPP Income
Annual
PPP Income
Annual PPP Income
(USD)
Growth Rate
(USD)
Growth Rate (USD)
Country Growth Rate
Country
Country
2005
2005
2005
(1990-2005)
(1990-2005)
(1990-2005)
3.2
22273 Macedonia
-0.1
7200
-0.1
10845
Slovenia
Russia
1.9
14494 Romania
1.6
9060
-2.4
6848
Lithuania
Ukraine
3.6
13646 Bosnia-Herz.
12.7∗
2546
2.2
7918
Latvia
Belarus
4.2
15478 Bulgaria
1.5
9032
-3.5
2100
Estonia
Moldova
4.3
13847 Albania
5.2
5316
0.2
3365
Poland
Georgia
1.9
20538
4.4
4945
Czech Rep.
Armenia
2.8
15871
2.0
7857
Slovakia
Kazakhstan
2.6
13042
…
5016
Croatia
Azerbaijan
3.1
17887
-6.8
3838
Hungary
Turkmenistan
0.3
2063
Uzbekistan
-1.3
1927
Kyrgyzstan
-4.0
1356
Tajikistan
Source: (UNDP, 2007b:277-80)
∗ Data refer to a period shorter than that specified.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
In addition to these differences, economies liberalize and privatization programs differences into
account the given the countries that economic performance transit and was successfully programs resuming a
limited similarities are observed It is therefore, the country assessments is not based on the individual country,
assessments should based on grouped countries.
Transition economies economic performances of the assessment is done in particular in Europe the
countries involved growth and income per capita indicators compared to others is quite high that acceptable.
Central and Eastern European Countries and the Baltic Countries’ per capita of income levels 13000-22000 USD
(PPP) while between 1990 and 2005 between the years annual growth rate is between 1.9 - 4.3. In South East
European countries per capita of the level of income 5000-9000 USD (PPP) and economic growth rate accept
Bosnia and Herzegovina and Albania, is quite low. In The Commonwealth of Independent States of the countries
in the Russian to those who level of income 8000 USD (the PPP under the) while the average annual
performances are growth distributed between -6.8 and 4.4. In this group, economic performances of the Turkish
Republics are lowers than the others
When we compare the transition economies with countries in low human infrastructure and low
economic performance, due to social investments by the socialist regime, the human development level is
relatively high. But economic crisis in the early 1990s, due to the low economic performance, human and social
development has affected negatively. In particular, The Baltic countries and the Commonwealth of Independent
States of death of countries increased rates of, the average life expectancy shortening, education and health
investments for the slowdown causes. Kyrgyzstan's income, education and health indicators taken into
consideration of the economic crisis effects more open to a trend.
Meanwhile, in 1993, per capita in purchasing power 2330 USD decreased to USD 1850 in 1995. The
average life expectancy with 67.3 years decreased to 66 years and enrolment ratio decreased from 66 to 63
percent (UNDP, 2000a:87). The indicators of human and social development came to their levels after 2000.
From Ancient period’s philosopher to historian’s Ibn el Sina to the many intellectual made various assessments.
But, the modern explanation of human development and UNDP Human Development Reports based on Amartya
by the endurance work and the people to boost options as the process is defined (UNDP, 2007/8:22-23). A Long
and a healthy life, information acquisition and a good standard of living the necessary conditions for the
provision of the human and social development concept include four fundamental elements.
Table 2: GDP and HDI for Transition Economies (1985-2002)
GDP/HDI
HDI
Reduction
GDP
Russia, Bulgaria, Romania, Moldova, Kyrgyzstan,
Reduction
Ukraine, Kazakhstan, Macedonia, BosniaHerzegovina, Serbia-Montenegro
GDP
Stable
GDP
Increase
HDI
Stable
Tajikistan, Georgia,
Armenia, Azerbaijan
HDI
Increase
Uzbekistan, Belarus,
Turkmenistan
Albania, Latvia, Croatia,
Lithuania, Estonia, Slovakia
Slovenia, Poland, Czech
Republic, Hungary
Source: (Tridico, 2005:26-27)
These are: people in economic preferences expand, from the point of economic efficiency capable of the
event, the people against discrimination and to protect human development potential to use freely and equality of
the present time, and the future capabilities offspring safe use of the sustainability was passing by and the
capabilities of potential and that these drive development of capability (UNDP, 2007/8:22-24). The relationship
between human development and economic performance is the very complex. Economic growth boost mad
contribute the human development level. But the economic growth and the humanities would not occur at he
same time. It is therefore transition countries’ economic performances and the human development relationship
could not be explained for the entire same manner. The Countries economic performances and the human
development performances are different. The most important reason is that difficulties order to change economic
system and the effort includes social and economic costs.
According to a study which covers 1985-2002 a Russia according to the, Bulgaria, Romania, Moldova,
Ukraine, Macedonia, Bosnia and Herzegovina, Montenegro Serbia, Kyrgyzstan and Kazakhstan to both the
income and the human development of the decline in the while the Albanian, Latvia, Lithuania, Croatia, Estonia
and Slovakia humanities and social development levels also defended income levels increased. Tajikistan,
Armenia, Georgia and Azerbaijan in the humanities and social development levels stay the same and but the
level of income declined (Tridico, 2005:26/27).
According to the another study covering the years 1990-1997,16 countries human development levels of
declined. The basic reasons for these are the economic recession and plague diseases (HIV/AIDS). The study
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
includes Belarus, Bulgaria, Azerbaijan, Kyrgyzstan and Tajikistan which have economies recession and human
development levels are affected negatively (Mendoza, 2001:101).
1.2. Human Development
Human development is about expanding the choices open to people to lead full and valuable lives. First
articulated in the 1980’s, the approach provides a means of understanding ant tracking economic and social
progress which is rooted in the real-world experiences of ordinary people. A company values of property not
only the value of the assets but also the value of the employees’ information and skills level. Thus, the countries
development level is not only measured by per capita income of citizens but also the information, knowledge,
health level taking into consideration to evaluate. It Therefore, In order to measure and compare developed
countries development level, we consider quantitative indicators and qualities indicators. Even though, there are
different definitions of human capital represents the combination of ability of labor and individuals. Human
capital covers, people information together with the skills, talent, attitude, reliability, commitment to, creativity,
to share information at the request, become part of the team in organization to concentrate on goals (Abeysekera,
2004:253)
Human capital not only covers knowledge, information and skills but also covers several features.
These features are; technical information and talent; Education; Professional qualities of Employees; a
community participation in the Professional; development; Entrepreneurship spirit, innovation, progressive,
Training programs; racial, religious and competition; equality Flawed equality; employment security; Syndicate
operating; number of Employees , properties and effectiveness (Abeysekera, 2004:259).
Due to above difficulties to measure human capital and compare countries, we need to find a new a
practical way. It is therefore, The United Nations Development Organization (UNDP), measure the development
level by education, health and revenue data of the Human Development Index (HDI). This index formation gives
information about the development level and human development level. Thus, it is the most important index.
Certainly human development have several indicators but difficulties in measuring, the limited, limited number
of indicator should be used. Political, cultural and economic freedoms, starting with the human rights of
individuals, increase the efficiency and creativity alternatives to provide that contributes too many of the size of
the human development based on three dimensions. If only three dimensions taken into consideration under a
large number of variables may change the direction of study basic indicators may be ignored.
The first dimension of human development index is measured by the long and healthy life, the average
life expectancy. Life expectation is an indicator of health and nutrition in connection with a better life. If a
country provides health and nutrition in good conditions to individuals, the average life expectancy there will be
longer. The infant mortality rate is the most basic health indicator of the average life expectation. In particular,
baby death rates are high in countries where the average life expectancy is very low to maintaining. The low rate
of infant mortality rate shows high the average life expectation.
The second dimension of human development index is information and education. This dimensions the
most important and easily calculable indicators and measured. Education rate e be measured with countries in
particular the comparisons when it comes to the wrong consequences to open. Enrolment ratio of adults with the
rate of literacy is the same but the higher education levels of the different two country's education indicators in
this measurement will be the same. But for all the countries and easy to check the education rate to the school
and the countries of education level of measuring the indicators show hospitality
The first dimension of human development index is necessary resources to have better life. There
several difficulties to measure it. Thus, average income levels taken into account.
In order to remove disparities between countries, per capita of GDP figures are used and marginal
contribution are taken into consideration. Each of the countries, education and health indicators of certain
calculations transferring 0 and 1 of value gathered after divide three and thus each country's index is calculated.
This calculation, each of the indexes a points improvement in the middle of the same with the human
development process marginal of the different effect on possible. For example, 0.1 point increase in the average
life index contributes differently on 0.5 or 0.9, but the average will be the same finally. Moreover, in health
index, 0.1 points contribute on average for income or education index, this change differently human
development index. Despite the fact some difficulties, the human development index shows development level
of countries and this still an important index.
1.3. Human Development Index
Human capital is the most fundamental element of the economic development for Countries. Physical
capital, technological development and natural resources in other such as presence of elements of the system has
economic the functioning of the other of the key factors are among the others. But the human capital economic
development of basic elements of the one of the as well as the other elements are producing and efficiently in the
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
exercise of a positive and of the effects. It is therefore countries human developments and social development of
the capital's potential is very important as a factor is considered. In order to have an assessment for Transition
Economies’ economic development according to only income levels take into consideration is not very
meaningful happening. Because the countries market economy transition process is still ongoing and the level of
income citizens’ welfare levels designation may inadequate. It is therefore of income, with levels of economic
with the development of an important factor in the human development levels of development is also taken into
account.
The human development level in transition economies is relatively high in spite of a huge recession and very
poor economic performance, thanks to previous investments made in social dimensions by previous regimes. In
fact, economic performance would suggest worse human development levels. Nevertheless, the transition
process influenced the non-income dimensions of people, often worsening the main indicators (RuminskaZimny; 1997).
Table 3: Human Development Index and Transition Economies (2007-8)
Country
Rank
1 Iceland
27 Slovenia
32 Czech Rep.
36 Hungary
37 Poland
42 Slovakia
43 Lithuania
44 Estonia
45 Latvia
47 Croatia
53 Bulgaria
60 Romania
64 Belarus
66 Bosnia & Hrz.
67 Russian Fed.
68 Albania
69 Macedonia
73 Kazakhstan
76 Ukraine
83 Armenia
96 Georgia
98 Azerbaijan
109 Turkmenistan
111 Moldova
113 Uzbekistan
116 Kyrgyzstan
122 Tajikistan
177 Sierra Leone
Developing Count.
WORLD
Combined
gross
Adult enrolment
Life
literacy ratio for GDP per
education capita
Life
expectanc
rate
y at birth
(%) (PPP US$) expectancy Education
(%)
2005
2005
2005
2005
index
index
81.5
100
95.4
36510
0.941
0.978
77.4
99.7
94.3
22273
0.874
0.974
75.9
100
82.9
20538
0.849
0.936
72.9
100
89.3
17887
0.779
0.958
75.2
100
87.2
13847
0.836
0.952
74.2
100
78.3
15871
0.821
0.921
72.5
99.6
91.4
14494
0.792
0.965
71.2
99.8
92.4
15478
0.770
0.968
72.0
99.7
90.2
13646
0.784
0.961
75.3
98.1
73.5
13042
0.839
0.899
72.7
98.2
81.5
9032
0.795
0.926
71.9
97.3
76.8
9060
0.782
0.905
68.7
99.6
88.7
7918
0.728
0.956
74.5
96.7
69.0
7032
0.825
0.874
65.0
99.4
88.9
10845
0.667
0.956
76.2
98.7
68.6
5316
0.853
0.887
73.8
96.1
70.1
7200
0.814
0.875
65.9
99.5
93.8
7857
0.682
0.973
67.7
99.4
86.5
6848
0.711
0.948
71.7
99.4
70.8
4945
0.779
0.896
70.7
100
76.3
3365
0.761
0.914
67.1
98.8
67.1
5016
0.702
0.882
62.6
98.8
73.0
3838
0.627
0.903
68.4
99.1
69.7
2100
0.724
0.892
66.8
99*
73.8
2063
0.696
0.906
65.6
98.7
77.7
1927
0.676
0.917
66.3
99.5
70.8
1356
0.689
0.896
41.8
34.3
44.6
806
0.280
0.381
66.1
76.7
64.1
5282
0.685
0.725
68.1
78.6
67.8
9543
0.718
0.750
GDP
index
0.985
0.902
0.889
0.866
0.823
0.846
0.831
0.842
0.821
0.813
0.752
0.752
0.730
0.710
0.782
0.663
0.714
0.728
0.705
0.651
0.587
0.653
0.609
0.508
0.505
0.494
0.435
0.348
0.662
0.761
GDP per
Human capita rank
Dev. Index minus
HDR rank
Value
0.968
4
0.917
4
0.891
2
0.874
2
0.870
11
0.863
-1
0.862
3
0.860
0
0.855
4
0.850
4
0.824
11
0.813
3
0.804
8
0.803
17
0.802
-9
0.801
30
0.801
11
0,794
1
0.788
9
0.775
20
0.755
24
0.746
4
0.713
5
0.708
25
0.702
25
0.696
29
0.673
32
0.336
-5
0.691
0.743
-
Sources: (UNDP, 2007b:229-232)
Transition Economies of the human development index of the indicators and orders are shown in Table.
This table shows that during the 2007-2008 index indicators the high value and alignment of the country is
Slovenia in 2005. After Slovenia, Central Europe and the Baltic countries follow: Poland, Slovakia, Lithuania,
Estonia, Latvia and Croatia. Human development index in the area of Transition Economies are second places:
Bulgaria, Romania, Bosnia-Herzegovina, Albania and Macedonia. The Commonwealth of Independent States
group of the transition economies in the last places among the South East Europe in the group of the Transition
Economies of the human development their own indicators comparison of their following graphs. According to
the human development index, the most high value to Bulgaria the lowest value of the Macedonia. This total of
the 5 countries of the human development levels is above threshold level.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
GDP
1
HDI
0,9
0,8
0,7
0,6
Tajikistan
Krgyzstan
Moldova
Uzbekistan
Turkmenistan
Georgia
Azerbaijan
Ukraine
Armenia
Kazakhstan
Albania
Macedonia
Russia
Belarus
Bosnia H.
Romania
Croatia
Bulgaria
Latvia
Estonia
Lithuania
Poland
Slovakia
Hungary
Czech R.
0,4
Slovenia
0,5
Figure 1: GDP Index and HDI for Transition Economies (2008)
Source: (UNDP, 2007b:229-232)
In general, only countries which experienced an increase in their human development level had a
sustained economic growth. Hence it seems to us that, in transition economies, human
Development is a sufficient, yet not a necessary, condition for economic growth. This means that there can be
economic growth without human development, but if there is human development then there will be economic
growth (Tridico, 2005:21).
69 Macedonia
66 Bosnia Hrz.
68 Albania
0,8
60 Romania
0,9
53 Bulgaria
1
53 Bulgaria
60 Romania
66 Bosnia Hrz.
68 Albania
0,7
69 Macedonia
0,6
Figure 2: South Eastern Europe Transition Economies and HDI Rank (2007-8)
Source: (UNDP, 2007b:229-232)
Over the past decade, Romania has been experiencing, like many other countries in transition, a process
of transformation that involves changing economic and political systems inherited from the communist era. For
all the potential that Romania holds and despite many achievements on the political front, the first decade of
transition can be considered one of missed opportunities and great disappointments on the economic and human
development fronts. Dismantling the command-and control former socialist state with its social protection
system and building the bases of a new market-oriented and democratic system has come at a tremendous cost
for the over 22 million Romanians (UNDP, 2000b:19)
The Human Development Reports shows that Romania has finally gained a place among the high
Human Development Index (HDI) countries by surpassing the 0,800 value of index which makes access to this
group. Data for 2004 ranks Romania on the 60th position among 177 countries and data from the National
Institute for Statistics shows a further improvement in the HDI for Romania (0.808 in 2005) thanks to
improvements in all the three basic components of the index: longevity, education level and standard of living,
with the greater increase in the latter one (UNDP, 2007a:5).
But, unfortunately Romania still holds the last position within the European Union countries, the lag
between Romania and the next country in the HDI ranking (except Bulgaria ranked 54 with a HDI equal to 0.816
in 2004) is 15 places, namely 0.045 HDI points. As it can be seen in the figure below, the evolution of the HDI
for the European Union countries is quite uneven.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Between 1995 and 2000 the 10 New European Union member countries registered higher increases in
the HDI compared to the 15 European Union countries at that time, but afterwards, between 2000 and 2004, the
trend smoothens and the two slopes become very similar. The two newest European Union member countries,
Romania and Bulgaria, are far from the EU25 average and also from the ten countries that have acceded in 2004.
As for the difference in the HDI between Romania and Bulgaria the latest tendencies are in favor of Romania, as
the overall index increased sharper in its case and the distance between the two countries is smaller by every year
that passes (UNDP, 2007a:5).
1
EU 15 Average
EU 25 Average
0,9
New EU 10 Average
EU 27 Average
0,8
Romania
Bulgaria
0,7
1990
1995
2000
2004
Figure 3: The Evolution of Human Development Index in EU15, EU25, EU27, and New EU10 (2004), Romania
and Bulgaria
Source: (UNDP, 2007a:6).
Yet, there is a very important aspect that should be mentioned regarding the Human Development Index
dynamics for Romania for the period 2000-2004 and that is the significant change in its value (0.027 points
increase1) equaled only by Estonia and Lithuania and outrun only by Latvia (0.030 points increase) in the
European Union area. This stands for consistent evidence of the important progresses Romania achieved in the
area of human development during the last years.
Table 4: Human Development Evolution for Selected Countries in Central and Eastern Europe (CEE)
Country
HDI
HDI Evolution
2004 Rank
1990
1995
2002
1990-2000
1995-2005
Hungary
0.807
0.810
0.848
0.027
0.048
38
Croatia
0.806
0.798
0.830
0.017
0.007
48
Bulgaria
0.795
0.784
0.796
-0.011
0.012
56
Romania
0.771
0.759
0.786
0.001
0.017
69
Ukraine
0.798
0.751
0.777
-0.036
0.015
70
Turkey
0.683
0.713
0.751
0.030
0.038
88
Source: (UNDP, 2005b:19)
How does the human development profile of Romania fair in comparison to its region and neighbors?
According to the 2004 HDR, of the 15 countries from the CEE only 9 can be classified as high human
development countries (with a HDI value of over 0.800). These countries are Slovenia, the Czech Republic,
Estonia, Poland, Hungary, Lithuania, Slovakia, Croatia and Latvia. The other 6 countries, including Romania,
can be classified as medium human development countries (with HDI values ranging from 0.788 0.667). There
are no countries from the CEE classified as having low human development. If the 15 countries of CEE were
ranked according to their 2004 HDI value, Romania would be ranked 14. The HDI of Romania is below the
average of the CEE (UNDP, 2005b:18). In addition, Romania has to cover a human development deficit of 0.14
to reach the high human development level. Since 1999, the HDI for Romania has increase average 0.009 per
year. In the CEE region, fourteen countries, such countries as, Hungary (0.848), Croatia (0.830) and Bulgaria
(0.796) have a higher HDI value than that of Romania (0.786). As can be seen in Table 4, the CEE region shows
a diverse pattern of evolution of the HDI. While Hungary and Croatia have increased their HDI value at high
rates during the last decade, the gains for other countries, including Romania have been at much slower and
lower rates during the same period. Romania's transition impact on its human development profile becomes even
clearer, when it is analyzed in the context of the remaining countries that are considered candidates to join the
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
EU, (Bulgaria, Romania, and Turkey), those that are already part of the EU like Hungary and those countries that
in the future may be consider candidates like Croatia, Russia and Ukraine. As can be seen in Table 4 among
these countries, Romania would be ranked somewhere in the middle, below Bulgaria and Russia, but on top of
Ukraine and Turkey.
All of the countries in Table 4 have been pursuing some form of reform policies during the last decade.
However, the impact on human development of these processes has been different in all these countries. The
HDI value of a country shows the distance that it has to travel to reach the maximum possible value of 1. In this
line of analysis and using the values found in Table 4, while Hungary shortfall would be 15%, Romania's would
be close to 21% almost twice as much as Turkey.
2. Human Development Index and Bosnia-Herzegovina
It was once the proud boast of Bosnians and Herzegovinans that their country, the former Yugoslavia,
was the America of Eastern Europe. The positions of Slovenia and to a lesser extend Croatia today may be taken
into consideration in this regard. The Human Development Index and the level of GDP, however, now place BiH
among the less developed countries of Europe. In fact, they place BiH among the last two or three of whatever
comparative group one chooses, be they the countries of Eastern and Central Europe, the CIS or the Stability
Pact (UNDP, 2002:99).
The state of human development in BiH, thus, gives grounds for concern. Per capita incomes remain
low, health indicators are at best static and educational performance shows only weak improvement. Most
problematic of all, BiH citizens still face a raft of discriminatory practices which circumscribe access to basic
services and weaken the wider democratic process. Year by year BiH is falling behind other countries in Eastern
Europe (UNDP, 2005c:13). Among the countries of Central and Eastern Europe, Bosnia and Herzegovina is in
ninth position as far as the HDI rank is concerned, just above Macedonia and Albania. In terms of the literacy
level, the enrolment rate in all three educational levels, and realized GDP/pc (PPPUSD), BiH is below the
average of Central and Eastern European countries. BiH is 8.0% more developed than the world’s average in the
human development context, 14.1% more developed than the average of countries in the medium human
development category and 2.6 times more developed than the country which comes last. In 2004, Norway had
the highest HDI in the world within index, 21% higher than that of Bosnia and Herzegovina. BiH’s HDI rank is
62nd out of 177 reporting countries, below Malaysia and above Mauritius (UNDP, 2007c, 177).
Within the context of human development, a stable progress has been achieved in BiH since 2002. The
calculated human development indices are presented in Table 4, together with analyses of trends for the period
2000-2004. The Human Development Index in 2004 was 0.804. By obtaining this score, BiH has entered the
group of countries with high human development, i.e. those with a HDI score of 0.800 and above. However, it
must be recognized that the increase in the HDI compared to 2003, when it was 0.793, partly results from a
revision of the value of PPP adjustment, which simply reflects the difference between relative prices in BiH and
the rest of the world. The increase in PPP has to a large degree contributed to the HDI increase. Nevertheless, it
is important to consider that most of the assessment data is based upon special surveys and thus the change is not
wholly methodological (UNDP, 2007c, 30).
Table 4: HDI Trends for BiH
Year
2000
2001
2002
2003
2004
2004/2000
Life
expectancy
at birth
73.3
73.0
74.0
74.1
74.3
1.014
Adult
literacy rate
85.9
88.9
94.3
96.7
97.1
1.130
Combined
enrolment
ratio
64.0
67.0
67.3
68.0
69.0
1.078
GDP/pc
PPP USD
2875
3949
5970
6250
7230
2515
Life
expectancy
index
0.805
0.800
0.817
0.818
0.822
1.021
Education
index
0.787
0.817
0.853
0.871
0.877
1.114
GDP index
0.560
0.614
0.683
0.690
0.714
1.275
HDI
0.718
0.744
0.784
0.793
0.804
1.120
Source: UNDP, 2007c, p.165.
Significant differences between the two Entities remain. The Federation of BiH (FBiH) is 1.5% above
the average of BiH as a whole, while RS, with a value of 0.784, and is still under the threshold of countries with
high human development. It is also worth emphasizing that there will doubtless be huge variations within FBiH
and it therefore cannot be assumed that high human development conditions are predominant throughout its
territory. The stability of HDI growth in BiH is also reflected in the fact that BiH’s in 2004 was 12% higher than
for 2000 (UNDP, 2007c, 30).
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
1
Life expectancy index
0,8
Education index
0,6
GDP index
0,4
2000
2001
2002
2003
HDI
2004
Figure 4: HDI Trends for BiH
Source: (UNDP, 2007c, 166.)
Despite the increase in HDI, in comparison with other countries of Central and Eastern Europe, BĐH’s
position remains virtually unchanged. BiH lies in ninth place, just ahead of Macedonia and Albania. In global
terms the HDI value would place BiH 62. Yet it is important to recognize this is a national ranking and assumes
the placement of other nations does not change (UNDP, 2007c, 31). BiH in aggregate human development terms
is continuing to progress. Its HDI score now places it at the lower band of the most developed countries in the
world.
Table 5: HDI and GDI Relation for BiH and the Entities
HDI
BiH
0.793
2003
FBiH
0.806
RS
0.771
BiH
0.804
2004
FBiH
0.816
RS
0.784
GDI
Difference HDI-GDI
0.782
0.011
0.790
0.016
0.765
0.006
0.801
0.003
0.806
0.010
0.779
0.005
Source: (UNDP, 2007c, 172.)
The GDI (Gender Development Index) for 2004 was 0.801, which shows an improvement over 2003.
But gender inequality is still articulated, especially in education and economic activities. It is important to stress
that the difference between HDI and GDI shows significant gender inequality in BiH and both Entities.
0,8
HDI
0,7
GDI
0,6
BiH 2003 FBiH 2003 RS 2003
BiH 2004 FBiH 2004 RS 2004
Figure 5: HDI and GDI Relation
Source: UNDP, 2007c, 172. (BiH: Bosnia Herzegovina, FBiH: Federation of Bosnia and Herzegovina, RS:
Republica Srpska)
In 2004 there was a reduction in the difference between the HDI and GDI, primarily due to the more
dynamic growth of GDI. The growth of GDI was influenced by the increase of employment of women, as well
as a higher rate of female enrolment at all three educational levels (UNDP, 2007c, 172).
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Table 6: HDI for FBiH Cantons and the RS
Canton or RS
1
2
3
4
5
6
7
8
9
10
11
Sarajevo
Neretva
West Herzegovina
Republica Srpska
Central Bosnia
Tuzla
Zenica Doboj
Podrina
Posavina
Herceg Bosna
Una Sana
Economic
index
0.792
0.718
0.712
0.633
0.600
0.594
0.581
0.569
0.563
0.563
0.548
HDI
Variation from State level
0.824
0.800
0.798
0.761
0.760
0.758
0.754
0.750
0.748
0.748
0.743
5.1 %
2.0 %
1.8 %
-2.9 %
-3.1 %
-3.3 %
-3.8 %
-4.3 %
-4.6 %
-4.6 %
-5.2 %
Percentage difference on
high HD level (0.800)
3.2 %
0.3 %
0.0 %
-4.8 %
-5.0 %
-5.3 %
-5.5 %
-6.0 %
-6.3 %
-6.3 %
-6.9 %
Source: UNDP, 2005c, 165.
The above show a reasonable level of variation with the highest value (Sarajevo) being 5.1 % above the
State-level figure and correspondingly the lowest value (Una Sana Canton) is a similar percentage below the
State level. More interesting are the relatives the High-Human Development interval which begins at a value of
0.800. This illustrates a distinct break in the data with three regions (Sarajevo plus the Herzegovina cantons)
being within the category, and the others all around 5 % below. Indeed, the level of variation outside the higherscoring regions is very much reduced (UNDP 2005c, 165).
Conclusion
After the collapse of Soviet bloc, these countries have found them in the transition process of the free
market economy. All the country's market economy transition process preceded in different ways, these
countries area called transition economies. Transition economies has effected in the transition process due to
internal and external factors. Transition economies, the Central European Countries and the Baltic countries are
on the top for that human development index and South East Europe follow up these countries.
Independent States are ranked at the lowest level. In the Independent States, Republics of Turks are
lower situated among them. Except, Russia and Slovak, in the Transition Economies according to the GDP, they
are the located in the top level. Albania, according to the human development index is ranking 30 steps above the
threshold level. For the development of Transition Economies, they should protect their enhancements and foster
their progress. This depends on countries’ transition progress to market economy.
These countries, many sectors as the education and health are transforming from previous system to
market based economy and this gives soma difficulties for the people and new system is face to be failure.
Liberalization also comes with social and economic costs for humanities and this bring difficulties to use social
potential capital uses. With market economy based on the system and firmly economic stability, countries human
capital potential will drive economic developments.
Among the countries of Central and Eastern Europe, Bosnia and Herzegovina is in ninth position as far
as HDI rank is concerned, just above Macedonia and Albania. BiH in aggregate human development terms is
continuing to progress. Its HDI score now places it at the lower band of the most developed countries in the
world.
From the perspective of almost years of transition, at least three lessons can be learnt. The first lesson is
obvious that transition takes time and has high human costs. The second is that growth alone does not eradicate
human poverty. And the third is that rethinking the transition strategy is needed based on a concept of human
development.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
UNDP (2000b), Team for The Preparation of National Human Development Report Romania 2000, Bucherest.
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424
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284
Title
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The Comparative Analysis of Economic and Social Performances of Transition Economies and the Case of Bosnia-Herzegovina
Author
Author
YUMUSAK, ibrahim Güran
BiLEN, Mahmut
Abstract
A summary of the resource.
Transition economies have undergone an enormous transformation since 1989- 1991. After the recession of the early 1990’s, some of these economies experienced a GDP recovery, at a different pace, with different outcomes in terms of economic growth and social performance (human development, employment, poverty, etc.). This paper tries to analyze the level of human capital for Transition Economies by comparative methods. In order to analyze level of human capital for Transition Economies, we used the human development indexes. Transition economies progress in the transition process has different effects due to internal and external factors. The human development level in transition economies is relatively high in spite of a huge recession and very poor economic performance, thanks to previous investments made in social dimensions by previous regimes. In fact, economic performance would suggest worse human development levels. Nevertheless, the transition process influenced the nonincome dimensions of people, often worsening the main indicators. Among the countries of Central and Eastern Europe, Bosnia and Herzegovina is the ninth position as far as HDI rank is concerned, just above Macedonia and Albania. BiH in aggregate human development terms is continuing to progress. Its HDI score now places it at the lower band of the most developed countries in the world.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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Does Sector Make a Difference in HRM Practices?
Turkish Companies in Marmara Region
Gültekin YILDIZ
Sakarya University-Business Administration Department
Serkan BAYRAKTAROĞLU
Sakarya University-Business Administration Department
Yasemin ÖZDEMĐR
Sakarya University-Business Administration Department
Özlem BALABAN
Sakarya University-Business Administration Department
Abstract: HRM discipline, occurring in 1920’s in the USA, has been predominant in the
USA and the European countries and there has been evolving phases throughout the 20th
century (Storey, 1989). It has been observed that the activities, objectives, dimensions, and
importance of the human resource function have changed dramatically since the 1970s
(Lundy, 1994). This is a result of social, political, economical, legal and technological
developments and the changes of work life, organisational features, labour. HRM functions
and practices are also affected by many other factors like national and organisational
circumstances (Andersen, 2000), sector, market type (Beer et al., 1984).
In Turkey, there is similar development. The Turkish HRM literature has a paralel rhetoric
especially to USA and Europe but the reality HR practices are not at the level that is told in
the literature (Ercek, 2006). The reality is different as a result of internal and external factors
effect to organisational structure and so to HRM functions. These factors are organisational
features, interpersonal relations, job’s features and personal characteristics are the internal
factors and external labour, external resources, rivals and regulators are the external factors
(Kaynak et al., 2000; Bingol, 2006; Sabuncuoglu, 2000), the current situation of the market in
which the company operates (Uyargil and Ozcelik, 2001). Also in Turkey organisational
structure (Ercek, 2006) and the number of employees (Çakmak et al., 2007) in other words
organisational size affect the HR practices and causes differentiation. Organisational size is
also one of the factors that determine the efficiency of HR practices (Aycan, 2001; Ozcelik
and Aydinli, 2006; Tanova and Nadiri, 2005).
The circumstances of the HR practices in Turkey must be investigated more (Ercek, 2006).
This paper starts from this point and will investigate if sector is an important factor that affect
HRM practices.
This paper critically explores if sector makes a difference in HRM practices and according to
this aim the research will be based on questionnaires conducted within companies of
manufacturing and service sectors who have HR departments in Marmara Region of Turkey.
The data gained from the questionnaires are analyzed statistically using SPSS 17.00.
Keywords: HRM, HRM in manufacturing sector, HRM in service sector
Introduction
Human resource management (HRM) discipline, occurring in 1920’s in the USA, has been
predominant in the USA and the European countries and there has been evolving phases throughout the 20th
century (Storey, 1989). It has been observed that the activities, objectives, dimensions, and importance of the
human resource function have changed dramatically since the 1970s (Lundy, 1994). This is a result of social,
political, economical, legal and technological developments and the changes of work life, organisational
features, labor. And also sector (Kaufman, 2007) and market type (Beer et al., 1984) are effective on HR
departments structure and HR practices based on functions.
There are many HRM models in America and Europe which are descriptive for determining the HRM
understanding of an organisation or a country. These models are maps factors that affect the HRM structure in a
general manner or and HR functions in a more specific view. The Model of Brewster and Bournois underlines
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the importance of sectors effect on HRM practices (Brewster and Bournois, 1991; from Pinnington ve Edwards,
2000: 19).
The importance of human in the organizations and the features of the jobs/works are different in
different sectors. In manufacturing sector automation and information technologies are used more than service
sector. But in service sector the production and consuming are simultaneous, the intensity of labor is high so a
structure that is consisted of a face-to-face relationship between the personnel and customers. A production
focused management style is dominant in manufacturing sector and in service sector, a customer focused
management style is dominat (Gök, 2006). Because of these main differences of sector features and
management styles, in two sectors different HRM practices are expected.
The Background of HRM Practices in Turkey
In Turkey, there is similar development. The Turkish HRM literature has a parallel rhetoric especially
to USA and Europe but the reality HR practices are not at the level that is told in the literature (Ercek, 2006).
The reality is different as a result of internal and external factors effect to organisational structure and
so to HRM functions. These factors are organisational features, interpersonal relations, job’s features and
personal characteristics are the internal factors and external labour, external resources, rivals and regulators are
the external factors (Kaynak et al., 2000; Bingol, 2006; Sabuncuoglu, 2000), the current situation of the market
in which the company operates (Uyargil and Ozcelik, 2001). Also in Turkey organisational structure (Ercek,
2006) and the number of employees (Çakmak et al., 2007) in other words organisational size affect the HR
practices and causes differentiation. Organisational size is also one of the factors that determine the efficiency
of HR practices (Aycan, 2001; Ozcelik and Aydinli, 2006; Tanova and Nadiri, 2005). In addition HRM
functions and practices are also affected by many other factors like national and organisational circumstances
like sector (Andersen, 2000).
The circumstances of the HR practices in Turkey must be investigated more (Ercek, 2006). This paper
starts from this point and will investigate if sector is an important factor that affect HRM practices.
Objective of the Research
This paper critically explores if sector makes a difference in HRM practices. Because in the literature it
is mentioned that sector is one of the important factors that affect the HRM practices. And also if our hypothesis
is true, this can give an opinion to the organisations for realizing their HRM decisions according to sectoral
circumstances.
Research Methodology
According to the objective of this study, the research will be based on questionnaires conducted within
companies of manufacturing and service sectors who have HR departments in Marmara Region of Turkey. The
data gained from the questionnaires are analyzed statistically using SPSS 17.00.
General Findings
The datas are gained from 62 manufacturing organisations and 63 service sector organisations, totally
125 organisations. In this section, the findings of our research will be indicated.
Initially the frequencies about our sample’s features like sector and personnel number will be given in
Table 1.
Table 1: The Frequencies about Sample’s Features (Sector)
Manufacturing
Service
Sector
N
%
Sector
N
Textile
12
19,4
Tourism
29
Construction
13
21,0
Banking
18
Iron and steal
8
12,9
Insurance
12
Automotive
17
27,4
Other
4
Food
11
17,7
Information technologies
1
1,6
TOTAL
62
100
TOTAL
63
%
46,03
28,57
19,04
6,3
100
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According to literature organisational size is an important factor that affect the HR structure so
frequencies about this is like in Table 2.
Table 2: The Frequencies about Sample’s Features (Personnel Number)
Manufacturing
Service
Personnel number
N
%
Personnel number
N
1-49
26
41,9
1-49
16
50-99
8
12,9
50-99
4
100-250
5
8,1
100-250
16
More than 250
23
37,1
More than 250
27
TOTAL
62
100
TOTAL
63
%
25,4
6,3
25,4
42,9
100
The personnel number frequencies show that there is similarity and balance in our sample in both
sectors.
Findings about HR Practices
In this part the findings of our research about HR practices will be given in two parts; for
manufacturing and for service sector, then will be compared generally.
As it is indicated in the previous researches the name of the department related with human resources is called
human resources. The distribution of frequencies on the name of the department is in Table 3.
Table 3: Distribution of Frequencies on the Name of the Department
Manufacturing
Service
Department name
N
%
Department name
N
Personnel
16
25,8
Personnel
8
Administrative and financial 6
9,7
Administrative
and 6
works
financial works
Accounting and financing
3
4,8
Human resources
Other
(Personnel
and
administrative works, personnel
and human resources)
TOTAL
32
3
51,6
4,8
Accounting
financing
Human resources
Other
62
100
TOTAL
and
%
12,7
9,5
4
6,3
40
5
63,5
7,9
63
100
There is similarity in the name of the department related with human resources and in both sectors
human resource department is used mostly with great rate.
In manufacturing sector, human resources managers/directors (N= 15, 24, 2%) and human resource and
financial works managers (N= 14, 22, 6%) are at the position for the responsibility of HR function. And the
93% of the people who is responsible of HR department are graduated from university and from business
administration (N= 31, 50, 0%). And in service sector, human resources manager/director are at the position for
the responsibility of HR function with 28, 6%. And the 93, 7% of the people who is responsible of HR
department are graduated from university and 47, 5% of them from business administration. There is also a
similarity in the graduation of the people who is responsible of HR department.
*From this point it is necessary to indicate that the person who filled the questionnaires could select
more than one choice. So the most selected choices are mentioned here and the totals can be more than 100%
for each question.
As it is mentioned in the theoretical background, there are many internal and external factors that
affect HR practices. Here are the findings about these factors;
• In manufacturing sector, the most important internal factors that affect the structure of HR function are
indicated like total quality management (N=44, 70, 9%) and features of the employees (N=36, 58, 0%).
• And in service sector, the most important internal factors that affect the structure of HR function are
indicated like features of the employees (N=47, 74, 6%), strategic management (N= 42, 66, 6%) and
the top managers’ management style (N=38, 60, 3%).
The ranking of the internal factors that affect the HR practices is different. Features of the employees
are the only common factor mentioned above.
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
In manufacturing sector, the most important external factors that affect the structure of HR function are
indicated like labour structure (N= 46, 74, 1%) and competition density (N= 42, 67, 7%).
And in service sector, the most important external factors that affect the structure of HR function are
indicated like labour structure (N= 54, 85, 5%), competition density (N= 49, 77, 7%) and technology
(N=39, 61, 9%).
The external factors that affect the HR practices and their ranking of is the same.
The findings about HR functions in manufacturing sector can be indicated as below;
The necessity of ISO/TSE standards (N= 24; 38, 7 %) and HR/personnel selection (N= 24; 38, 7 %) are
the most important aims of the job analysis.
HR planning time is especially between 6 months and 1 year (N=29; 46, 7 %).
Using application form for HR selection is the most common used method (N=55; 88, 7%).
The most common used employee/ HR supply methods are overtime working (N= 32; 51, 6%) and
external employee/HR supply application (N= 31; 50%). Previous applications (N=34; 54, 8%) and
personal advices (N= 29; 46, 7%) are especially used as the type of external personnel supply
resources.
Organisations use conferences (N= 31; 50 %) and probation (N= 26; 41, 9%) as training methods most
commonly. The training result are evaluated by measuring previous and latter performances (N= 39;
62, 9%) and previous and latter tests (N=29; 46, 7%).
Job evaluation is used for employee selection according to job (N= 30; 48, 3%) and internal
movements like promotion and transfer (N=29; 46, 7%).
The most important factor that affect the wage level is effective performance appraisal (N= 44; 70,
9%) and the other market wages level (N= 22; 35, 4%).
Incentive wage system based on personal performance is the most common used wage system (N= 34;
54, 8%). Main wage plus premium/bonus is also being used frequently (N= 24; 38, 7%). The wage
increase is mostly affected by inflation rate adding performance results (N= 42; 67, 7%).
Salaried day off expect legal requirements for death, accident, marriage, etc. (N= 30; 48, 3%), bonus
(N= 30; 48, 3 %), cafeteria services and year permission money (N= 27; 43, 5%) are the most common
used social aids and services.
Performance lowness (N= 42; 67, 7%) and disciplinary (N=40; 64, 5%) are the most common layoff
reasons.
The findings about HR functions in service sector can be indicated as below;
Constituting job descriptions (N= 31; 49, 2 %) and job requirements (N= 31; 49, 2 %), job evaluation
(N= 27; 42, 9 %) are the most important aims of the job analysis.
HR planning time is especially between 6 months and 1 year (N=30; 47, 6 %).
Using application form for HR selection is the most common used method (N=56; 88, 9%). The other
ones are interview of one person (N= 34; 54, 0 %) and references (N= 33; 52, 4 %).
The most common used employee/ HR supply methods are external employee/HR supply application
(N= 37; 58, 7%) and internal movements like promotion and transfer (N= 28; 44, 4%). Previous
applications (N=38; 60, 3%) and personnel advices (N= 31; 49, 2%) are especially used as the type of
external personnel supply resources.
Organisations use conferences (N= 36; 57, 1 %) and probation (N= 21; 33, 3%) as training methods
most commonly. The training result are evaluated by measuring the usage level of what is learned
(N=32; 50, 8%) and pervious latter performances (N= 31; 49, 2%).
Job evaluation is used for internal movements like promotion and transfer (N=28; 44, 4%), equal wage
principle (N=27; 42, 9%) and also determining education necessity (N= 26; 41, 3).
The most important factor that affect the wage level is performance appraisal (N= 37; 58, 7 %) and
also market wages level is the effective factor (N= 31; 49, 2%).
Incentive wage system based on personal performance is the most common used wage system (N= 28;
44, 4%). Main wage plus premium/bonus is also being used frequently (N=23; 36, 5%). The wage
increase is mostly affected by inflation rate adding performance results (N= 38; 60, 3%). The other
important factor that affect the wage increase is average market raise (N= 21; 33, 3%).
Salaried day off expect legal requirements for death, accident, marriage, etc. (N= 32; 50, 8%), bonus
(N= 25; 39, 7%) and clothing aid (N=22; 34, 9%) are the most common used social aids and services.
Disciplinary (N= 46; 73, 0%) and performance lowness (N= 37; 58, 7%) are the most common layoff
reasons.
As a result we can generally say that;
The aims of job analysis in two sectors are different.
HR planning time is between 6 months - 1 year and is same in two sectors.
Using application form for HR selection is the most common used method in two sectors.
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•
The employee/ HR supply methods are different in two sectors but the type of external personnel
supply resources is the same.
• The training methods and the training evaluation methods are the same.
• The areas of job evaluation usage in two sectors are different.
• The factors that affect the wage level are the same.
• The wage systems and the factors that affect the wage increase are the same.
• The social aids and services are also the same.
• The most common layoff reasons are same in two sectors.
The general evaluation of the findings shows that there more similar aspects in HR practices than
differences.
Conclusion
Most of the HR functions and especially HR requirement and selection, training and development,
wage management, performance appraisal are nearly used in all organisations and in all sectors.
HR functions are affected by organisation culture, structure, organizational size and sector. So it is
thought that there is a difference between the HR practices of the organisations in manufacturing and service
sector.
This study’s findings shows that generally there are similarities in HR functions like HR planning time,
HR selection methods, HR supply resources, training methods and evaluation methods, wage management,
social aids and layoff reasons. But it must be said that although the methods used in these HR functions are
similar, the ranking and the factors that affect the HR practices are different. Also the aims of job analysis, HR
supply methods and the areas of job evaluation usage are different. As a result sector makes a difference in
some HR practices. But this result can’t be generalized. So many other researches that have bigger samples is
required to make general decisions and find the reasons of the differences in HR practices.
References
Andersen, A. (2000) “2001’e Dogru Insan Kaynakları Arastırması”, Sabah Yayıncılık, Istanbul.
Aycan, Z. (2001) “Human Resource Management in Turkey-Current Issues and Future Challenges”, International Journal
Of Manpower, Vol. 22 No. 3, pp. 252-60.
Beer, M., Spector, B., Lawrence, P.R., Mills, D.Q. and Walton, R.E. (1984), Managing Human Assets, Free Press, New
York.
Bingöl, D. (2006) Insan Kaynakları Yonetimi, Arıkan Yayınları, 6. Baskı, Đstanbul.
Brewster, C. ve Bournois, F. (1991) “Human Resource Management: A European Perspective”, Personnel Review, Vol. 20,
No. 6, pp. 4-13.
Ercek, Mehmet (2006) “HRMization in Turkey: Expanding the Rhetoric-Reality Debate in Space and Time”, International
Journal of Human Resource Management, Vol. 17, No. 4, pp. 648-672.
Gok, Sibel (2006) 21. Yüzyılda Insan Kaynakları Yonetimi, Beta Basım Dağıtım, Istanbul.
Kaynak, Tugrul, Z. Adal and et al., (2000) Insan Kaynakları Yonetimi, Istanbul Universitesi Isletme Fakultesi Isletme
Iktisadı Enstitusu Arastırma ve Yardım Vakfı Yayını, No: 7, Istanbul.
Kaufman, Bruce E. (2007) “The Development of HRM in Historical and International Perspective”, in The Oxford
Handbook of Human Resource Management, edit: Boxall, Peter, John Purcell ve Patrick Wright, Oxford University Press,
New York, pp. 19-47.
Lundy, O. (1994), “From Personnel Management to Strategic Human Resource Management”, The International Journal of
Human Resource Management, Vol. 5, No. 3, pp. 687-720.
Pinnington, A. ve T. Edwards (2000) Introduction to Human Resource Management, Oxford University Press, New York.
Storey, J. (1989) New Perspectives on Human Resource Management, Routledge, London.
Uyargil, C. and Ozcelik, O. (2001), “Some Characteristics of the Turkish HR Managers/Professionals and a Comparative
Study with Three European Countries (United Kingdom, Germany and Spain)”, Paper Presented At Global HRM
Conference, June 19th-22, Barcelona.
90
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Does Sector Make a Difference in HRM Practices? Turkish Companies in Marmara Region
Author
Author
YILDIZ, Gültekin
BAYRAKTAROĞLU, Serkan
ÖZDEMİR, Yasemin
BALABAN, Özlem
Abstract
A summary of the resource.
HRM discipline, occurring in 1920’s in the USA, has been predominant in the USA and the European countries and there has been evolving phases throughout the 20th century (Storey, 1989). It has been observed that the activities, objectives, dimensions, and importance of the human resource function have changed dramatically since the 1970s (Lundy, 1994). This is a result of social, political, economical, legal and technological developments and the changes of work life, organisational features, labour. HRM functions and practices are also affected by many other factors like national and organisational circumstances (Andersen, 2000), sector, market type (Beer et al., 1984). In Turkey, there is similar development. The Turkish HRM literature has a paralel rhetoric especially to USA and Europe but the reality HR practices are not at the level that is told in the literature (Ercek, 2006). The reality is different as a result of internal and external factors effect to organisational structure and so to HRM functions. These factors are organisational features, interpersonal relations, job’s features and personal characteristics are the internal factors and external labour, external resources, rivals and regulators are the external factors (Kaynak et al., 2000; Bingol, 2006; Sabuncuoglu, 2000), the current situation of the market in which the company operates (Uyargil and Ozcelik, 2001). Also in Turkey organisational structure (Ercek, 2006) and the number of employees (Çakmak et al., 2007) in other words organisational size affect the HR practices and causes differentiation. Organisational size is also one of the factors that determine the efficiency of HR practices (Aycan, 2001; Ozcelik and Aydinli, 2006; Tanova and Nadiri, 2005). The circumstances of the HR practices in Turkey must be investigated more (Ercek, 2006). This paper starts from this point and will investigate if sector is an important factor that affect HRM practices. This paper critically explores if sector makes a difference in HRM practices and according to this aim the research will be based on questionnaires conducted within companies of manufacturing and service sectors who have HR departments in Marmara Region of Turkey. The data gained from the questionnaires are analyzed statistically using SPSS 17.00.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Leniency and Severity Errors in Performance Appraisal in the Context of
Collectivist and Individualist Culture
Gültekin YILDIZ
Prof. Dr., Department of Business Administration
Sakarya University, Turkey
yildizg@sakarya.edu.tr
Adem BALTACI
Assist. Prof. Dr., Department of Business Administration
Kırklareli University, Turkey
adem.baltaci@kirklareli.edu.tr
Abstract: Although the difficulty in carrying out the human resources’ practices into life in
different cultures is a major problem that the implementers have been handling for years, the
“appraisal errors”, which are important obstacles in front of an effective performance appraisal,
are needed to be examined more deeply in terms of socio-cultural factors. Because,
performance appraisals may be affected much by the value judgments that may have quite
serious differences with respect to the cultures. Therefore putting forward the effects of the
context in which the appraisal errors take place, has a critic importance for making sense of the
error reasons and for creating solutions. In this study, leniency and severity errors, those are
included in the performance errors, have been examined in the context of collectivist and
individualist cultures. Besides, the question as “how do the judgment values of those cultures
affect the tendencies of the raters towards leniency and severity error?” has been tried to
answer. This theoretical study has revealed that the variety of the cultural differences could
affect the tendencies of the raters towards leniency and severity influentially.
Keywords: Performance Appraisal Errors, Leniency and Severity Errors, Collectivist and
Individualist Culture.
Introduction
Performance appraisal whose necessity and benefits have been proved by numerous researchers has
been presented as an objective and rational function in business management books and guide books; most of its
appraisal methods have been developed basing upon the assumption that the raters will be objective and free
from prejudice in their observation and decisions. Otherwise; it does not matter how perfectly and impeccable
your system works for the errors will be inevitable during the process since the people who will carry out the
appraisal and the ones who will be affected by its results are all human beings. When the complexity of today’s
human behavior patterns and the inadequacy of the appraisal systems in encompassing these behavior patterns
are considered, it is obvious that performance appraisal errors will play an important role in the theoretical and
the practical researches in the forthcoming years.
The researchers have made great efforts and developed numerous methods in order to find a method
which is free of errors. This effort is displayed evidently by Landy and Farr’s (1980:82) statements: “Mighty
efforts have been made to discover the potential effects of various appraisal formats for many years. The alleged
hypothesis states that the instrument being used to obtain the information has a substantial importance on the
accuracy and expedience of the obtained information.” In fact, one of the reasons of these numerous methods to
be able to choose in performance appraisal is the indefinite attempts made by researchers to develop an enduring
method against appraisal errors. But, a method which is free of errors has not been developed yet.
The prevalence of appraisal errors are stated by Warmke and Billings (1979:124) by following words: “The
subjective appraisals made about the employee’s performance are usually get spoiled and corrupted by the errors
like halo or leniency.” Another comment made by Spool (1978:853) that supports this view and also states that
appraisal errors are everywhere: “The methods based on observation are nearly much more vulnerable against
human error margin than almost all other methods.” The importance of the problem resulting from the appraisal
errors is also highlighted by Borman (1979:410): “Unfortunately, performance appraisals are nearly inevitably
corrupted by appraisal errors (e.g. halo, leniency error) and they probably present in accurate appraisal results of
individuals which were obtained during performance appraisal process.”
Proved existence of appraisal errors are an obstacle to the validity and reliability of performance appraisal and
have a negative effect on organization employees’ beliefs and satisfaction regarding appraisal results. Ilgen
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proved that despite the researches done for years to develop and improve this process, the dissatisfaction about
performance appraisals have not decreased. Murphy and Cleveland displayed that performance appraisals are
hard core target of criticism and complaints and this dissatisfaction have become a norm in most of the
companies (Holbrook, 2002:102). Because performance appraisal results form a basis for management decisions
and the dispute among performance appraisal results which arise between the uppers and the inferiors probably
cause interpersonal conflicts (Greenberg, 1991:51-60). The employees get satisfied with appraisal results only if
their beliefs about their performances, which are high, match with the results. Employees consider that the
feedbacks are unfair when their appraisal results are low and especially when they get less positive results than
their expectations.
As this will be inferred from the explanations given above, typical dependent variable of the performance
appraisal researches is the accuracy of the performance measurement and in this context a lot of independent
variables (roles, instruments, goals, criteria etc.) have been examined in order to determine their effects. But
there is a quite need to examine “the appraisal errors” which are one of the most important factors that have
adverse effects on the validity and reliability of performance appraisal and also to research in depth the effects of
the context in which these errors took place. In this work, from performance appraisal errors, leniency and
severity errors have been examined in the context of collectivist and individualist culture. The main purpose of
the work is to display how collectivist and individualist values affect the raters’ tendency towards leniency and
severity errors. In the framework of this basic purpose, the answers for the following questions are being looked
for in this research:
1. How do the collectivist and individualist culture values affect leniency and severity errors?
2. Does the raters’ individualist or collectivist cultural background differentiate their tendency towards
errors (leniency and severity)?
3. Can the collectivist and individualist culture values be the explanatory of leniency and severity error?
It has been aimed at attaining the goals of this work in the context of these questions. Leniency and severity
errors have been theoretically examined in terms of a socio–cultural factor by using secondary data by means of
literature study.
Culture and Performance Appraisal Errors
We can define culture in brief as an integrated system consisting of characteristic behavior models of
the members that belong to society (Czinkota et al., 1999:35). In other words, culture consists of perception,
believing, evaluation, communication and the shared factors which provide acting among the people who share a
language, a historical period, and a geographical region (Triandis, 1996:408). Thereby, it is considered that
culture has a strong and continuous impact on individual and corporations in all over the world. Especially
starting from 1970s, culture has become a controversial concept in terms of culture, business and management.
Until recent years, while it is alleged that management is universal, international culture was being ignored but in
the recent years it has been started to investigate about the influences of the intercultural differences on the
management and it has been proved basing upon the specific researches that cultures affect the individuals and
direct them to different behavior models. It has been observed that the people who live in different cultures react
differently against similar subject and conditions. Consequently, this intercultural differentiation is an
explanatory of important problems since they affect working methods of the corporations, behavior models of
the individuals and management styles (Sargut, 2001:137). One of the problems is the errors made in
performance appraisal which provide how effectively the human resources are used in the organizations, most
outcomes of which are used in managerial operations and actions.
Appraisal errors are judgmental errors which occur while an individual observes and assess the other
one (Latham et al., 1975:550-555). What is ideal in performance appraisal is that the appraisal results reflect the
accurate, unprejudiced judgments processes. But, as it has been mentioned earlier, since the people are at stake in
the appraisal, lots of emotion, needs, attitudes and values involve in the process. Accordingly, it depends on a lot
of factors to find out what extend it was created in an unprejudiced way and whether it was really used or not to
guide the appraisal. The most important factor among these is the cultural characteristics that the rater possesses.
Leniency and Severity Error, Collectivist and Individualist Culture
Before starting to discuss how cultural differences of the raters affect their tendency towards leniency
and severity errors, it is useful to present the definitions of these errors and what collectivist and individualist
culture means in order to be able to understand the case.
Leniency error is one of the common errors which are faced in performance appraisals (Ilgen and
Feldman, 1983). Leniency error is defined as an error which impels to make higher appraisals compared to other
raters and a valid/reliable tendency as to certain raters (Kane et al., 1995:1039). According to another definition,
leniency error is the case when the raters unjustly give higher scores, appraisal results. These scores are
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evaluated by the distances of middle point of the scale to other scores or by their range to an accurate score (Saal
et al., 1980:413-428). In other words, leniency errors limit the used value range and this causes a statistical
decrease in the validity.
Just opposite of the leniency error is severity error that this is the case when the rater evaluate the
employee’s performances lower than it actually is (Can et al., 1998:167). In other words, it is the case when the
rater evaluates and employee or a group of employees lower than they actually are without taking into account
their actual success level. This tendency is usually observed among the raters who are inexperienced and not
exactly aware of the factors that affect the performance, whose self-confidence is low and also who get low
appraisals. Besides that the desire to show themselves as a perfectionist and an exacting manager and high
standards in the corporation play role in such appraisals (Bayar, 2002).
Collectivism means that people connect tightly to the social environment, the social members’ take care
of each other and protect the organization’s members and interests. Individualist means that individuals have
loose connections with the social framework and they are responsible for themselves (Hofstede, 1983:79).
According to another definition, individualism is the tendency that people only care about their and their families
interests (Hudgetts and Luthans, 1993:103). The first main discrepancy between collectivist person and
individualist person falls out in the point how these people define themselves. While the collectivist person feels
himself dependent on the other members of the group, individualist person displays more independent attitudes.
Second discrepancy point falls out in the positioning regarding the goals. While the individualist person’s goals
differentiate from the goals of the group that he/she belongs to, collectivist person’s goals make compliance with
the goals of the group. While the individualist person determines his/her collectivist behavior according to
his/her personal requirements and the rights which he/she perceives, collectivist person acts group norms
according to his/her duties and responsibilities. For a collectivist person, having relationships with internal group
and other people comes before rationalism. However individualist person makes rational calculations which keep
cost and benefit rates in the front (Sargut, 2001:187).
Collectivist culture individuals have the features of owning alignment, challenge, conflict avoidance
and more compatible behavior models. It seems that individual initiatives are not encouraged and the ideas are
determined within the group (Hofstede, 1984). On the contrary individualist cultures are described with their
features which accept conflict, consistency and put less emphasis on compliance, individual initiative is expected
and individual’s thought expressions are valuable. Therefore, in individualist cultures it is expected to show
greater tendency to opinion diversities.
Performance Appraisal in Collectivist and Individualist Culture
These distinctive features of the societies which have been mentioned above reflect on organizational
structures according to dominant culture and accordingly on performance appraisal systems. Here, Hofstede’s
individualist and collectivist dimension in the research that he carried out in order to explain how and why the
people from different cultures act as they will be expository as to be able to understand the issue better.
Forasmuch as some performance appraisal researchers claim that collectivist and individualist dimension is the
most important cultural dimension which has an impact on performance appraisal. Because, the person who
provides the assessments and feedback affect performance appraisal process in many aspects such as the purpose
and content of performance appraisal process (Milliman et al., 1998:157)
Hofstede analyzed culture in four dimensions in his study which he carried out on 116,000 employees
in 40 countries. These dimensions are power distance, uncertainty avoidance, individualism and collectivism,
masculinity and feminity. Hofstede’s individualism and collectivism dimension corresponds to “the relationship
between the individual and collectivism which rifles in a certain society” (Hofstede, 1984:148).
To express more explicitly, individualism and collectivism dimension is related to what extent the individuals’
goals and need prevail over the groups that is belonged to goals and needs (Triandis, 1989; Hofstede 1984).
Individualist societies care for individuals’ competition over the group’s welfare and individuals define
themselves with their own characteristics and success (Fiske et al., 1998). For instance, in such a culture,
individuals act according to their personal interests and employee–employers’ relations are generally perceived
as a business exchange (Seddon, 1987) and freedom of choice and individual initiative are emphasized. Within
this culture, most of the multi–sourced performance appraisal systems have been designed to obtain a
comprehensive and objective assessment about the individual’s performance (London and Smither, 1995; Denisi
and Kluger; 2000). Usually, individual performance assessments which have been obtained from various sources
are valued. As long as feedback performance develops self–confidence and success, individualists attribute value
to constructive and critical feedback (Milliman et al., 1998). The importance of personal relations between the
subject and raters has been reduced in order to facilitate to provide the critical feedback and performance
development.
On the other hand, due to the collectivist cultures’ nature, they have shown a tendency not to overrate
the role of the individuals in any case. Thus, in performance appraisal, it is focused on group performance rather
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than individual performance of each members of a group. The employees who work in a collectivist culture
make an effort to see their own interests above the groups’ interests (Hofstede, 1984) and employers recruit the
individuals who take place in their groups and whose behavior overlap with the group behavior (Huo and Von
Glinow, 1995). For the collectivists, it is very important to save the appearance (Fiske et al., 1998), to reduce the
differences and to maintain the harmony and good relations among the group members. The practices which are
individual–based human resource management covers is perceived as a threat to the team spirit since it moves
attention from group success to the individuals’ success.
The Impact of the Raters’ Collectivist and Individualist Cultural Background on Their
Tendency to Make Mistakes about Leniency and Severity
It is not too surprising that cultural differences which affect organizational structures appraisal systems
also have influences on leniency and severity errors from assessment errors. As mentioned before collectivist
cultures care about in–target goals togetherness, cooperation, loyalty and commitment; challenges and disputes
among group members are ignored at all costs. Therefore, raters in performance appraisal mostly make lenient
assessments; so disputes, resentments, in–group this harmony are being ignored (Milliman et al., 1998). The date
obtained from feedback sessions proves that the collectivists tend to ignore the disputes among the employees
(Cascio and Bailey, 1995).
Within the collectivist cultures, it is more important to ensure compliance with others, to gain a sense of
belonging than reflecting a positive personal image which could disrupt the group harmony (Korsgoard et al.,
2004:874). To ignore these problems in order not to distort the image may cause the appraisals regarding
employee performance to be more lenient and inaccurate. The researchers have revealed in a research that the
Malaysians whose individualism is low avoid giving negative feedback and Chinese managers make leniency
errors in the appraisals they perform (Chow, 1998; Seddon, 1987). As a support to this, in a research carried out
in Republic of China, in which 982 couples who work in 9 different institutions in leader and subordinate
positions have been used as subjects, the appraisals regarding performance that individuals carried out on their
own are compared to the appraisals regarding inferior performance that were performed by supervisors. Results
indicate that Chinese employees assessed their own performance less tolerant than their supervisors. These
results contrast with the performance appraisal results which American employees typically do about themselves
and are more lenient compared to their inspectors (Farh et al., 1991:129). These results coincide with the results
of Hofstede’s (1997).
Hofstede has found out in his study that the employees who belong to Republic of China are the most
collectivist and American employees are the most individualist. Leniency error which arises among American
employees is compatible with view that the individualist appraisers have the impulse to see/perceive themselves
as positive as possible.
This view rooted in a profound way in western, individualist tradition which emphasizes individual
achievement, personal competence and self-respect. Exaggerated personal perceptions accord with individualist
cultures; and don’t accord with collectivist cultures which promote interpersonal harmony a interdependence,
solidarity and group harmony (Farh et al., 1991:131).
The Effects of Psychological Process on Leniency and Severity Errors
To display the psychological processes regarding the appraisers who have different cultures can lead to
some different results as to performance appraisals. Thus, individualists focus on their own uniqueness, to
achieve their goals, their internal reference forms, self ego (Oyserman et al., 2002). This case potentially drives
them to do harsher assessments on other people’s behaviors models. The collectivists think that self-ego may
easily be affected by static social environment (Triandis, 2001). For collectivists, happiness implies control and
self-restraint in emotional and behavioral expressions. Thus it will be possible to maintain relations away from
dispute. Contrary to the judgments of collectivists, the question of causality and attributions are based on social
context in which social boundaries and behaviors take place. Collectivists’ focus on the case and context (on the
attitudes and behaviors of, in other words, on the content and characteristics of cases compared to individualists)
in which a behavior is being fulfilled can be a disadvantage to obtain accurate performance appraisals.
Collectivists have higher chances to make leniency error to maintain in-group harmony, because they
want to ensure the group to attain its goals and to maintain its happiness. Furthermore, the group members’
behaviors can be interpreted in the context of social boundaries (Oyserman et al., 2002). As a result, determined
for collectivists rationalism means the importance of determined fixed and static group relations in which the
exchange is based on the principles of equality and generosity. While explaining the research results, Smith
(2004) claims that in-group harmony in collectivist societies will encourage the individuals to do more tolerant
assessments which include consent/acceptance.
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In individualist cultures, it is not a big problem for individualists (compared to the collectivists) not to
give negative feedback for the fear of creating conflict among the employees. On the contrary, it is a priority to
express the attitudes and opinions in an honest way. In addition, individualists may tend to present harsh
appraisal results; because task performance and development are more important than the goal of maintaining
compatible relations among the employees. According to them, if the old relationships are quite troublesome,
new relationships can be easily established. According to the individualists, the relations are perceived as the
facilitator factors which serve to obtain their own interests. This makes the appraisal differences between the
individualists and collectivist to be noticed easily.
Cultural Differences between the Rater and Ratees
Another case which the culture can have a significant impact on appraisal behavior is the case when the
rater and ratees have different cultural backgrounds. For example, since the labor force is culturally more
different, this situation may occur often in North American institutions. In these cases, since the rater is not
aware of the behavior models within the ratee’s culture, the accuracy of the appraisals decrease (Triandis and
Brislin, 1984:1006-1017). For instance, an individualist rater may not be focusing on the contributions of the
ratee to the group he/she belongs to and may not care his/her team work skills. On the contrary, a rater with a
collectivist perspective may put more emphasis on the roles of the ratees in the team, the contributions they make
for the achievement of the team’s goals and he/she may pay less attention to their individual performance. As a
result, these cultural misunderstandings may cause to be fallen in leniency error in one and severity error in
another.
Motivation Approaches of the Raters
Another issue that must be dealt with here is the relationship between severity error and motivation in
the context of individualism and collectivism. Researchers offered explanations on the effect of motivation
behind the appraisers’ lenient and severe appraisals. Accordingly, it’s possible that managers can make different
appraisal regarding the employees’ motivation according to their individualist and collectivist cultural
background. Increasing number of studies suggest that North Americans for whom individualist values are
dominant within the context of business, are less aware of their colleagues’ socio-emotional expressions
(Sanchez-Burks, 2002). Although the recent intercultural surveys which have been carried out indicate that
people constantly say that the money is a factor that satisfies least their needs (Sheldon et al., 2001) an
intercultural research which was carried out by Morris and his friends about global company the idea that North
Americans bring a “Market Orientation” to their interpersonal relationships, in other words, they evaluate their
relationships according to their interests (Morris et al., 2000:97-123). As a support to this research, Miller claims
that Western individualism puts a greater emphasis on the role of external factors about the others’ behaviors and
has a common belief about “self–interest norm” (Miller, 1999:1053-1060). Self–interest norm defends that if
any economic interests exist, even if in the cases which employees believe that they are internally motivated,
external factors would be more effective. However, within the collectivist cultural contexts that self–interest
norm is less determinant, it is expected that managers potentially will pay more attention to the internal factors
that motivate the employees. When the managers’ who belong to collectivist culture compared to the
individualists, their employees will be assessed in the most useful way for the groups. Therefore, if the high
appraisal results will mean more employee satisfaction and more compatible relations, the managers will make
lenient errors depending on high assessments. In accordance with this, according to Morris and his friends’
findings, unlike North American employees who have individualist values, Spanish employees have
demonstrated a proximity orientation (having a high emotional commitment with his work–mates) and Chinese
employees have demonstrated a family orientation (a self–sacrifice orientation for group) (Morris et al., 2000:97123).
As a result, in the collectivist cultures, even if the low assessment results are deserved, the motivation decrease
among the people at the point of performance development (Longenecker et al., 1987), the raters’ tendency to
maintain positive relationships with the subjects (Murphy and Cleveland, 1995) may cause them to fall in
leniency error.
As it will be understood from the researches, in the performance appraisal, the raters’ cultural
differences will influence their tendency to fall in leniency and severity errors. An effective performance
appraisal system will only be possible with the creation of a system which offers valid and reliable results that
are free of errors. In the establishment of such a system, the need for not ignoring cultural differences among the
raters, determination of the socio–cultural factors in the error analysis play a critical role.
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Conclusion
Performance appraisal has become available in all areas of industry in today’s business life and it has
become an application which has a strategic competition advantage in the globally severe competitive
conditions. In a survey made by Locher and Teel, it has been observed that 89 % of the companies that
participated in the survey placed their performance appraisals on a regular basis (Locher and Tell, 1977). Bass
and Barrett argued that all institutions have a method regarding employee’s performance appraisal that they carry
out secretly or explicitly (Bass and Barrett, 1981:259). Despite the increasing popularity of performance
appraisal, there is a need to do a further examination as to socio- cultural factors on appraisal errors which affect
negatively the performance appraisal activities.
The research indicates that there is a need to do a very good analysis of social and cultural factors in
order to be able to explain the variability of leniency and severity errors are judicial errors which the raters do
during the appraisal process. So it is a result of distorted judicial process that here raters’ tendency to fall in
leniency and severity errors. To determine the intercultural differences in the context of leniency and severity
errors is very important both as a reflection of cultural differences on independent dimension and also as to
intercultural research methodology and the inferences in terms of emic/ethic features.
An aspect of the methodology will be emic when it is associated with a culture, in other words, only when it
moves in a certain way in a culture. If it works in a similar way in many cultures then it is considered to be
independent from culture and it is called ethic. When seen from this perspective, our study was to reveal an emic
reality. What this reality is that raters’ cultural differences affect their tendency to fall in leniency and severity
errors.
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Title
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Leniency and Severity Errors in Performance Appraisal in the Context of Collectivist and Individualist Culture
Author
Author
YILDIZ, Gültekin
BALTACI, Adem
Abstract
A summary of the resource.
Although the difficulty in carrying out the human resources’ practices into life in different cultures is a major problem that the implementers have been handling for years, the “appraisal errors”, which are important obstacles in front of an effective performance appraisal, are needed to be examined more deeply in terms of socio-cultural factors. Because, performance appraisals may be affected much by the value judgments that may have quite serious differences with respect to the cultures. Therefore putting forward the effects of the context in which the appraisal errors take place, has a critic importance for making sense of the error reasons and for creating solutions. In this study, leniency and severity errors, those are included in the performance errors, have been examined in the context of collectivist and individualist cultures. Besides, the question as “how do the judgment values of those cultures affect the tendencies of the raters towards leniency and severity error?” has been tried to answer. This theoretical study has revealed that the variety of the cultural differences could affect the tendencies of the raters towards leniency and severity influentially.
Date
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2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Turkish Financial Reporting System and Capital Markets’ Regulations
Feyyaz YILDIZ
Assist.Prof.Dr., Afyon Kocatepe University,
Department of Business Administration, Turkey
Cemal ELĐTAŞ
Assoc.Prof.Dr., Afyon Kocatepe University,
Department of Business Administration, Turkey
celitas@aku.edu.tr
Mustafa ÜÇ
Res. Assist., Afyon Kocatepe University,
Department of Business Administration, Turkey
Abstract: Accounting is a knowledge system which records, classifies and summarizes the
economic activities of the companies. In this turn accounting has very close links with many
social economic factors that shapes an accounting system in a coıuntry. The aim of this paper
gives information about contemporary Turkish accounting system and its relation with capital
markets’ regulations. Also, this paper reviews current literature on accounting standard
setting issues and the last developments in Turkey since 1923. It should be addressed that,
there’s no capital markets and bourses before 1980s in Turkey. After this date significant
changes has lived both in economy and accounting system in axis of capital markets and
candidacy process of European Union. Also this situation brought out theoretical debate on
the change of current accounting system from continental Europe to Anglo-Saxon system.
1. Introduction
Accounting is referred as a language of business (Mueller et al. 1991). Accounting is not independent
discipline. Accounting is shaped by the environment in which it operates. Just as nations different histories,
values, and political and economic systems, they also have different patterns of financial accounting
development. Accounting is not identical in all countries. This diversity is the result of business environment in
the related country. It is interesting to note, too, that when countries’ business environments are similar, their
financial accounting systems also tend to be similar (Mueller et al. 1991).
In the phase of literature review, we saw that some external and internal factors affect the accounting
development in a country. We can point out the factors under these titles which Mueller referred to them
(Mueller et al.1991; Çürük, 2001).
• Relationship between business and the provider(s) of capital.
• Political and economic ties with other countries.
• Legal system.
• Levels of inflation.
• Size and complexity of business enterprises, sophistication of management and the financial
community, and general levels of education.
Variables mentioned above bring about to develop a country’s accounting system. After a certain time,
some nation’s accounting systems begin to resemble each others. And this process concludes the clusters. In
accounting literature has got two main accounting clusters (Mueller et al., 2001; Volmer et.al. 2007). They are;
British-American (Anglo-American) Model is cited investor-oriented and Continental (Continental European)
Model is cited creditor- oriented.
The accounting in Turkey has been formed in the line with creditor-oriented,Continental European
model. Nevertheless Join Stock companies have got peculiar regulations and we cannot say that only
Continental European Accounting regime could have been influenced on preparing and putting forward these
regulations (Çürük, 2001). Also it will be beneficial to remind that, in Turkey, official capital markets grew in
1980’s. After the enactment of Capital Market Law (CML) in 1981(Sümer, 1999).
Despite the fact that Turkish companies have started to issue securities (mainly shares and bonds) in
the 1970s, considerable developments in the securities market in Turkey have been experienced following the
years that the CML was enacted. Increase in share issue, particularly following the years that the Istanbul Stock
Exchange (ISE) started operation was notable. ISE started operation in 1986 with 40 registered companies and
now there are 349 registered companies in ISE as the date of 2009/15.04 (imkb.gov.tr). From the legal system
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perspective, all companies listed on the Istanbul Stock Exchange (ISE) are registered with the Capital Market
Board (CMB). Capital Market Board is an institution which entitled by the Capital Market Law. Capital Market
Board fulfill the duties and exercise authority which given by the CML (Capital Market Law, Act,17,22).
After the introduction, the paper is organized as; following chapter two gives information about
regulations in accounting. In the third chapter the new accounting standard setters and their standards will be
place after 1980s. Turkey’s prospective European Union (EU) membership and its influence on the accounting
is in chapter four. The paper will conclude with chapter five.
2. Accounting Regulations In Turkey
In Turkey, all joint stock companies with more than 250 shareholders or which offer their securities to
public including all companies listed on the ISE have been required to be registered with CMB. As far as
financial reporting is concerned, there is no specific regulation that addresses the listed companies only.
Companies listed on ISE, like those companies unlisted but registered with the CMB, are required to their
financial reports in accordance with CMB’s regulations (CML.Act;11 and Çürük, 2001).
There was no specific regulation or accounting standards that addresses merely the accounting of the
private-sector in Turkey until early 1980’s. Turkey, however, has experienced a major breakthrough in the area
of accounting and financial reporting since then. The main recent developments that have had direct impact on
disclosure practices of Turkish companies have been the financial reporting regulations that were introduced by
the Capital Market Board (CMB) in the 1980s and the Ministry of Finance (MF) in the 1990s.
In this point, one can say that, before the 1980-1990 period, there is not a differentiation like that listed
and unlisted companies in Turkey. Therefore all companies’ accounting practises were carrying out with the
same regulations in Turkey until 1980’s. What were these same regulations? These are; Turkish Commercial
Code and Turkish Tax Laws.
Republic of Turkey’s first Commercial Code is date 1926 and no: 865 code. This code is referred to
German resources and brought two important renewals. First renewal was about the joint stock companies’
regulations in the code and second renewal was concerning about obligatory keeping books by companies. This
code could not develop accounting practices as expected from business enviroments. Because, state owned joint
stock companies’s accounting regulations preserved code’s influence (Turmob, 1998). New Turkish
Commercial Code was enacted in 1956. The Commercial Code (TCC) No. 6762 of 1956, which is still in force,
was prepared by a committee headed by German Professor Hirsch. TCC No. 6762, is broadly divided into two
books. The first books address general principles of commercial trading, including requirements for
bookkeeping and the second book addresses commercial partnerships and companies, including limited liability
and joint stock companies (Çürük, 2001).
Essentially, TCC has shortcomings on the accounting regulations. For instance, it does not take in to
consideration “depreciation”. TCC also leave all companies free to choose their amortization methods (Bektöre
et.al,2008). On the other side, taxation plays very important role in the formulation and application of
accounting in Turkey. Therefore tax laws which issued 1950’s should be noted here. These are: The Income
Tax Law (No: 193), the Corporate Tax Law (No: 5422 It’s superseded in 2006also new Corporate Tax Law
Enacted in June 2006) and the Tax Procedure Law (Law No: 213). Still listed companies in Turkey prepares
two different financial reports first is the in the compliance with CML and Capital Market Board’s regulations
and second is that compliant with Tax laws and Ministry of Finance’s regulations.
3. New Accounting Standard Setters And Their Standards
In this part, we will try to examine formation and development of accounting standards and their
functions for the listed companies after the 1980s up to now. As we specified that the prior parts of this paper,
1980s were very important years for the both listed companies and the development of accounting in Turkey.
Two major events occurred in those years. Firstly In 1981 the Capital Market Law (CML) was issued and with
respect to this law Capital Market Board (CMB) established. Another major event was, establishing of Istanbul
Stock Exchange (ISE) in 1986.
Approximately after two years of its establishment, Capital Market Board, issued its first regulation
about accounting and financial reporting. The name of this communiqué is “Standard Financial Statements and
Reports” which was introduced in 1983. Also CMB issued a “General Standard Accounts Chart” as a
supplement for the companies in 1987. In CMB’s first communiqué involved in; uniformity in the accounting,
general accepted accounting principles, financial statements formats and footnotes. (Gökdeniz, 1996:42).
The CMB’s first regulation in accounting and financial reporting; Communiqué No. VIII/2 remained in
force till 1989. Capital Market Board amended and developed its previous communiqués. As a result, CMB
enacted Communiqué No. XI/1. With the respect to enactment of Communiqué No.XI/1, CMB’s previous
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communiqués concerned with accounting and financial reporting were superseded. Also this communiqué
shows the compliance with European Fourth Directive (Gökdeniz, 1996).
The aim of the Communiqué XI/1 summarized in the Article 1, is to establish principles and rules for
the preparation, presentation and publication of financial statements and reports that apply companies controlled
by Capital Market Board. “Principles and rules” refer to fundamental accounting concepts, valuation and
measurement rules to be used in the preparation of the financial statements and reports. The financial statements
stated in Art.1, on the other hand, include a balance sheet, and income statement, cash and fund flow statements,
a statement of costs of goods sold and profit distribution statements and reports comprising the annual report
and the audit board’s report, as specified in Arts. 2 and 53 of the Communiqué (Çürük, 2001).
In the present day, for the listed companies one can say that the most important regulation of Capital
Market Board is “Communiqué XI/25”. The exact name of communiqué is “The Communiqué about
Accounting Standards in the Capital Market”. This Communiqué is consist of 727 articles and it encompasses
each of 33 International Financial Reporting Standards (IFRS). IFRS take places in the communiqué were
showed by a table as a appendix that enclosed this paper. Communiqué XI/25 was introduced by CMB in 2003.
But the Communiqué enacted compulsory in 01/01/2005, however, companies willing to carrying out the
Communiqué has released free since 31/12/2003.
The aim of the Communiqué specifies on Art.1 is to indicate that, accounting principles and rules for
the preparation and presentation of financial statements which will be drawn up by the companies. This
additional official aim which indicated in the Communiqué, As the President of Capital Market Board Dr.
Cansızlar specified that, with the globalization of the capital markets and especially European Union (EU) begin
to come to force to the listed companies to prepare their consolidated financial statements as IFRS, that has
accelerated of preparation and enactment of Communiqué XI/25 (Ankara SMMM Odası, 2004).
In the other hand, after 1990s two accounting standard setters were established in Turkey. First
established standard setter was Turkey Accounting and Auditing Standards Board (TMUDESK). TMUDESK
has been established with the supporting of Union of Chambers of Certified Public Accountants of Turkey
(TURMOB) in 1994. TMUDESK has brought together 60 members who are accounting experts for each related
sector in the country. The purpose of TMUDESK is; to indicate the essences of preparation of the financial
statements and to fulfill the uniformity in accounting principles for all business enterprises in Turkey. Also the
Board worked about determining the Auditance standards.
Board paid attention on issuing standard, in compliance with international accounting standards.
Therefore the Board were sending reports to International Accounting Standards Board (IASB) concerning with
its works in the end of year. In 2001, Board issued 19 accounting standards (Türmob and Tmudesk, 2001). The
standards of TMUDESK only had recommedation feature so it caused lacking of support of law and it was
resulted with the weakening the influence of TMUDESK (Turmob, 1998:54).
In Turkey the real breakthrough in the subject of standard setter is that the establishment of Turkish
Accounting Standards Board (TASB). TASB was established with a amendement into Capital Market Law in
2002. TASB is consist of 9 members who are experts in the field of accounting and finance. TASB has got
autonomous budget and self-administration. The main mission of TASB is; to determine and publish national
accounting standards which will provide adoption and development of national accounting principles and will
be applied for public interest for the financial statements have to be, adequate of need, true, reliable, balanced,
comparable, understandable in the presentation of audited financial statements.
In 2005, TASB and International Accounting Standards Committee Foundation (IASCF) signed a
copyright agreement. As the provisions of this agreement, TASB accepts IASCF’s official translation procedure
in the process of preparing the standard. Therefore TASB aimed to general acceptance and validity of its
standards all over the world (tmsk annual report 2005). The standards were introduced by TASB was named as
Turkey Financial Reporting Standard (TFRS) or Turkey Accounting Standard (TAS). The TFRS and/or TAS
determined by TASB are classified with the principles of related IFRS or IAS. TASB issued 7 TFRS and 29
TAS up to now.
4. The Relationship Between Prospective Turkey’s EU Membership And Accounting
Applications
Primary relations between Turkey and EU began with the Ankara Agreement in 1963. It established an
association between European Economic Community (EEC) and Turkey. The basic objectives of this
association includes the continuous and balanced strengthening of trade and economic relations and the
establishment of a customs union in three phases as well as the free movement of workers between parties.
The real breakthrough in the relationships between Turkey and the EU came with the decision taken by
the Helsinki European Council on 10-11 December 1999. It declared Turkey as the thirteenth candidate states.
Compliance with the Copenhagen political criteria was similarly emphasized as a prerequisite for the opening of
accession negotiations. From the early 2000s Turkey has made noticeable progress towards the meeting
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Copenhagen political criteria owing to reforms like that the New Civil Code. The convergence in many fields
with EU was sustained in Turkey (Fişne, 2003).
In the side of accounting and finance of this convergence, we can look at Dr.Çürük’s research as a
sample. A part of his research is interested in the relationship between Turkish listed companies’ accounting
requirements with practices and European Union Fourth Directive (EUFD). In the research, he used the CMB
Communiqué and financial statements of the listed companies over the period 1986-1995. He aimed to test the
impacts of the EUFD on disclosure requirements and practices in Turkey.
Findings of this research indicates that; there is a strong association between the level of emphasis
placed on the main disclosure issues in the text of the CMB Communiqué and that in the text of the EUFD and a
high level of conformity between the disclosure required by the CMB Communiqué and the EUFD. Even he
specified that CMB’s Communiqué is the direct translation of the EUFD. Also he specified that Turkish
companies paid increasingly more attention to the disclosure of information required by the EUFD than to the
disclosure information not required by the EUFD, particularly following the enactment of CMB Communiqué
(Çürük, 2001).
As we mentioned in part 3, for the listed companies in Turkey, the most important regulation is
“Communiqué XI/25” which issued by CMB. Also this Communiqué is almost direct translation of IFRS.
European Parliament and Commission’s requirement (2002) about to adopt International Accounting Standards
(IAS) for the listed companies which prepare consolidated financial statements and Communiqué XI/25 in
Turkey, point out International Accounting Standards. In this point as far as Turkey adopt the IAS will converge
with EU’s requirements on accounting and financial reporting in a certain degree.
Also there is a project for convergence of regulation’ institutions in candidate countries with the
institutions of member countries. The name of this project is “twinning project”. This project’s framework is to
match a candidate country’s regulation institution with a member’s one. In this point Capital Market Board has
been matched with German regulation institution BaFin (spk.gov.tr).
5. Conclusion
This paper reviews current literature on accounting standard setting and the last developments focused
with capital market’s regulations in Turkey. We should address that, there’s no capital markets and bourses
before 1980s in Turkey. In those years only accounting standards are commercial code and tax laws. Turkey’s
accounting and financial reporting requirements and practices were closed and limited as well as economic
activities in the country. In all its aspects, accounting and financial reporting were under the influence of
Continental European accounting regime.
With the rapid change in economy in 1980s, capital markets gained legality. With the regulations of
Capital Market Board, listed companies began to give account of their investors. Now the process of change in
accounting and financial reporting began to tend to Anglo-Saxon accounting regime. Especially in lately 1990s
and early 2000s first of all institutions established that are only deal with accounting standards. These
institutions mainly referred International Accounting Standards (IFRS). While authorities issue standards, also
they think to achieve convergence with European Union’s accounting regulations.
Especially Turkey Accounting Standard Board (TASB) will has full legal enforcement over the both
listed and unlisted companies. Because Turkish Commercial Code draft that is expected to come to force in
2009 or 2010, point out that all companies will comply with TASB’s standards. In this point, recent
developments in the accounting and financial reporting indicates that; Turkey adopted IFRS and current
constituents of accounting are being tested with IFRS. The accounting constituents which don’t comply with
IFRS will be left.
References
Ankara SMMM Odası (2004) Sermaye Piyasasında Muhasebe Standartları Yayın No: 31, Ankara. 5-7
Bektöre, S., Benligiray, Y., Erdoğan, N., (2008), Dönem Sonu Muhasebe Đşlemleri, Nisan Kitabevi, Eskişehir.107
Çürük, T. (2001) An Analysis of Factors Influencing Accounting Diclosure in Turkey ISE Publications , Tasarım Matb.
Đstanbul. 20, 131, 144, 153, 160, 331-336.
Fişne, M. (2003) Political Conditions For Being A European State AKU Publications No: 51 Afyon. 99-102
Gökdeniz, Ü. (1996) Muhasebe Standartları Alfa Basın Yayın, Đstanbul. 42.
Mueller, G. Gernon, H. Meek, G. (1991) Accounting: An International Perpective Irwin, Second Edition, Boston. 1-16.
Sümer, A.,(1999), Türk Sermaye Piyasası Hukuku ve Seçilmiş Mevzuat, Alfa Yayınları, Đstanbul. 3
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TMUDESK (2001) Türkiye Muhasebe Standartları 2001 Turmob yayınları No: 166, Tmudesk Seri No: 5, Ankara. 3
Turmob, Aysan, M vd. (1998) Muhasebe Tarihi Türmob Yayınları No:51, Ankara. 19.
Volmer Bp, Werner RJ, Zimmermann J. New Governance Modes of for Germany’s Financial Reporting System: Another
Retreat of The Nation State? Socio-Economic Review 2007:5.443
Internet Resources
www.spk.gov.tr
www.tmsk.org.tr (for annual report) 3-12
Laws
Capital Market Law, No:2499 with The Amendment Law No: 3794.
Appendix
The International Financial Reporting Standards which take place in Communiqué XI/25 (In the Order to the
Communiqué)
IFRS NO
IFRS 1
IFRS 34
IFRS 7
IFRS 18
IFRS 2
IFRS 16
IFRS 38
IFRS 36
IFRS 32
IFRS 39
IFRS 22
IFRS 27
IFRS 28
IFRS 31
IFRS 21
IFRS 29
IFRS 33
IFRS 10
IFRS 37
IFRS 8
IFRS 17
IFRS 24
IFRS 14
IFRS 30
IFRS 11
IFRS 35
IFRS 20
IFRS 40
IFRS 12
TITLE OF IFRS
Presentation of Financial Statements
Interim financial Reporting
Cash Flow Statement
Revenue
Inventories
Property, Plant and Equipment
Intangible Assets
Impairment of Assets
Financial Instruments: Disclosure and Presentation
Financial Instruments: Recognition and Measurement
Business Combinations
Consolidated Financial Statements and Accounting for Investment in Subsidiaries
Accounting for Investments in Associates
Financial Reporting of Interests in Joint Ventures
The Effects of Changes in Foreign exchange Rates
Financial Reporting in Hyperinflationary Economies
Earnings Per Share
Events After The Balance Sheet Date
Provisions, Contingent Liabilities and Contingent Assets
Net Profit or Loss for the Period Fundamental Errors and Changes in Accounting Policies
Leases
Related Party Disclosures
Segment Reporting
Disclosure in the Financial Statements of Banks and Similar Financial Institutions
Construction Contracts
Discontinuing Operations
Accounting for Government Grants and Disclosure of Government Assistance
Investment Property
Income Taxes
IFRS 19
IFRS 26
IFRS 41
Employee Benefits
Accounting and Reporting by Retirement Benefit Plans
Agriculture
Source: Ankara SMMM Odası (2004) p: 350.
158
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160
Title
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Turkish Financial Reporting System and Capital Markets’ Regulations
Author
Author
YILDIZ, Feyyaz
ELİTAŞ, Cemal
ÜÇ, Mustafa
Abstract
A summary of the resource.
Accounting is a knowledge system which records, classifies and summarizes the economic activities of the companies. In this turn accounting has very close links with many social economic factors that shapes an accounting system in a coıuntry. The aim of this paper gives information about contemporary Turkish accounting system and its relation with capital markets’ regulations. Also, this paper reviews current literature on accounting standard setting issues and the last developments in Turkey since 1923. It should be addressed that, there’s no capital markets and bourses before 1980s in Turkey. After this date significant changes has lived both in economy and accounting system in axis of capital markets and candidacy process of European Union. Also this situation brought out theoretical debate on the change of current accounting system from continental Europe to Anglo-Saxon system
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Global Crisis: Consequences and Solution Possibilities
Arif YAVUZ
Istanbul University, Faculty of Economics, Turkey
dr.arif @ turk.net
Abstract: In this paper, the reasons and solutions of the 2008 global economic crisis are
discussed. In the first part, a comparision of 2008 global crisis with 1929 economic crisis, the
effects of each and also the differences are explained. The champions and the losers of the
current crisis are interpretted. Also, the estimated duration and the expected end time of the
crisis are discussed. In the second part, the effects of the crisis to the Global Economy and to
some of the countries are stated. The expected effects can be summarised as, “losing of
confidence in global market”, “having negative prospects”, “decreasing of the foreign trade”,
“shrinking of the national incomes” ,“shrinking of demand and consumption”, “increasing of
unemployment”. In the last part, some solutions for negative effects of global crisis are
offered. A world economic story is stated and suggested a new International Money Currency.
Restrictions for the virtual Money is recommended and also some new rules on international
trade and international finance system are offered.
Keywords: global economic crisis, effects of 2008 global crisis, 2008 global crisis, solutions
of 2008 crisis
Definition and Reasons for The Global Crisis
This conference paper has three parts: how does global crisis arise and what conditions do it develop
until today. Second, it will be discussed consequences of global crisis. Lastly, solution possibilities will be
offered for global crisis.
1 –Is the 2008 Crisis, a global or local one?
To understand how global crisis arises, first, we should comprehend is the crisis global or local? In light
of information in the last 3-4 months it is possible to say that the crisis we are living is a global one. This crisis is
diffferent then that of the 2001 and 1994 Turkish, 1996 Asian and 2000 Latin American crisis. These crisis were
regional. The crisis we live in today is global, that is it affects the whole world.
2– A comparison of the 2008 and 1929 world crisis
If we think about the 1929 crisis, it was the first world wide crisis. The crisis of today, unfortunately,
could be considered a second world crisis. Since 200-300 hundred years ago or in the 1700’s, society was
agricultural, and there was no possibility of the creation of global crisis. Because what we know today as being
factory production and means of transportation did not exist then. Society solely existed on the sustinance of
their agricultural means. However, by the end of the 1700’s and the beginning of the 1800’s with the
introduction of the industrial era, with the invention of the Steam machine by James Watt, there arose a drastic
structural change in society.
Society began to evolve from agricultural to industrial. At the same time, economic points of view were
also beginning to move to a more Classical economic perspective. In a liberal economy Classical economists
advised that “people should be, and people should pass”. This was based on the famous idea of the invisible
hand. Or that economy, inevitably, has the mechanisms to adjust itself, and that any type of intervention would
ultimately destroy this mechanisms function.
As a result the commencement of mass production and the industrial revolution lead to the typic
standard of factories producing as much product as possible because the same economists thought that “every
supply created its own demand”. This development and thought came from England. In turn, this idea also
passed to Europe and America. However, this theory did not develop as Classic Economists had desired.
Due to mass production in factories a substantial amount of stock piled up and as a result many factories
were forced into bankruptcy. This was the main reason for the 1929 crisis. In short, the 1929 crisis was industry
based, the cause of mass production and insufficient demand. In this period the crisis caused in the industrial
sector resulted in a crisis in the financial sector. Bankrupt factory shares had lost their value in the stock
exchange. The reason for this was the parallel processing of an industrial and a financial deficit. The profit from
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production made during the Industrial deficit was used to pay for for the principal and interest in the of loans in
the financial system.
There was a break down of economic claims in the frame of the 1929 crisis’s general economic offers
and claims regulations. There needed to a balance in supply and demand. The drastic and sudden imbalance of
this system was the cause of the crisis.
In order to understand the type of crisis we are in today we need to understand the structure of our
society. Although today, many countries are recognized as being industrial, America and Europe are no longer
considered as such but are refered to as technological societies. Since America and Europe are the culprits of
today’s crisis we need to further explore their infrastructures.
America and Europe have completed an industrial period and as a post industrial society have
progressed to an information or technological population. As a result America’s financial crisis has influenced
related societies. Therefore, information regarding America’s financial market directly influences the markets of
countries like England and France. Thus, the crisis of today is not an industrial but a financial crisis.
This crisis, using the fundamentals of finance, still maintains the imbalance of supply and demand.
Because money as a fundamental by-product of finance has caused the instability of this supply and demand
relationship. More specifically either there has been a high or low demand of money. There has been
contradictory points of view on this topic. Some experts in this area claim that the crisis is caused by the
abundance of money while others claim it is a result of a scarcity of money. According to our opinion this crisis
has been the result of the abandunce of monetary funds.
3 – Has the 1929 Crisis been more influential than the one of 2008?
When compared to the 1929 crisis, it could be said that the one of today is significantly more influential
because globalization is much more wide spread. The ending of the 1929 crisis, took approximately 4-5 years.
The crisis of today, because it is so major and wide spread, will be much more influential than the one of 1929.
4 – Causes of the 2008 Crisis
The crisis of today is caused by the wealth of money. Thus a wealth of money does not necessarily
translate into a wealth of physical money but a great quantity of virtual money.
4.1- A Story of a World Economy
This topic could be further explored in the form of an exemplary story: lets imagine that ten people live
on a planet. These ten people each offer a service or product. On of them labours in agriculture or grows and
sells fruit and vegetables. The second person labours in the production of raising animals for the sale of milk,
meat and cheese. Another is responsible for the production of textiles. Yet another produces vehicles and another
for the construction and sale of homes and buildings.
In short, all, except the tenth person, is responsible for the production of some goods or service. The
tenth person produces nothing. This person has a machine, and when he presses buttons on this machine he
produces a product stamped on paper used for exchange purposes. When he gives this paper to the car maker he
gets a car. When he gives some of this paper to the agriculturist or the grower of fruit and vegetables, he gets
produce. These nine people with the paper they have recieved use it amongst themselves to exchange their
products. This story could directly relate to the situation of today. This story is called “Ekmel Theory”. The
pressing of money must be based on some regulation as it was before. However, in 1971 with the abolish of the
Bretton- Woods system everything had changed.
4.2- The 1944 Bretton Woods System
In 1944, there was a small town in the US named Bretton Woods. An international money system was
accepted there. According to this system the US was pressed money depending on the US gold reserves. In this
system, 1 ounce of gold was equal to $35 or 1 US dollar was equal to 0,88867 grams of gold. International trade
was handled by the US dollar that was pressed depending on gold reserves of the US. If there was demand on
gold the US would provide it. This system was active in 1944, however, in 1971 was abolished. Today, there is
no requirement for the US to press money depending on gold reserves. The system was basically abolished
because of the dependance on gold reserves and press money was blocking the development of world economies
and international trade. Thus, this rule was cancelled. Any country could press any amount money, however,
international trade did not have the same acceptability or values. Today, there are two accepted money
currencies: the Euro and the American Dollar. Other country currencies are not valid in purchasing goods or
services in international trade (Seyidoğlu, 2003).
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4.3- Industrial or Financial, an Abundance or Shortage of Money?
Our global crisis is a financial wealth of money crisis. There exists groups who control or own the
world financial market. These groups are wide spread in America and Europe and could be called the proprietors
of globalization. The proprietors of globalization, although in reality consisting of many groups, could be
categorized into two factual groups. The proprietors of globalziation played with all their worldly assets and then
exerted these valued assets beyond all highest expectation.
4.4- All assets were played with as if in the stock exchange and within 5-6 years their values increased 2-6
Fold
Since Stock shares represent the value of a company, a company must increase its “real” value.
Although sometimes the increase in value of stocks is not dependant on “real” gains. This type of increase is a
speculative one. A company, for example, with a realistic growth of 10% to 30% could hold stocks that represent
the company may have increased in value five fold. The same type of specualtions have been made in stocks of
petroleum, iron, and copper. For example, a barrel of petroleum within 5-6 years (2003-2008) has increased from
25 US$ to 150 US$ (Đncekara, 2009). In the same time a ton of iron has increased from 300 US$ to 1500 US$. A
ton of copper has increased from 25 US$ to 150 US$ (Tuduk, 2008).
In the same manner real estate property value in the US has risen from 8 trillion US$ to 20 trillion US$
(Tarhan,2008). If these prices had risen in terms of an inflation it should only increase 30-40% because in
European countries inflation rates could be 2-4%, in America 3-4% and other developed countries are observed
at a steady 5%. Within 5-6 years of this type of inflation a 30% increase would be the possible outcome. In light
of this information petroleum, copper and iron or real estate do not reflect true gains. However, these abnormal
gains were not problematic in those days.
4.5- Instruments of derivatives: Two to the third = 2 x 2 x 2 = 8
Two to the fifth = 2 x 2 x 2 x 2 x 2 = 32
The aforementioned abnormal increase rates has not been with actual currencies but with virtual money.
As a result, these gains have been a devlopment based on derivative instruments. As known the derivative
instrument is a financial instrument that does not increase money volume arithmetically but geometrically. This
instrument frequently used in America has commenced and caused the wide spread global financial crisis
because these instruments (generally used in corporate equity and mortgage based documents)are sold and
bought in the global financial pool. These instruments have been observed in the large financial market
transactions of investment corporations, hedge funds, and retirement funds. However, the development of the
basis of the instrument, or real value, has been observed to be significantly different than the instrument itself.
For example, a home built with a mortgage of 100,000 US$ has lost its relationship with the application of the
instrument, the paperwork that represents the 100,000 US$ home has risen to 300,000 US$ with the buy and sell
procedures within the financial sector.
International accreditors like Fitch, Moodies, and S&P exist to evaluate the aforementioned procedures
within markets and their pools. These accreditor firms have noted investments with AA and AAA scores. This
way, investments have been known to increase. Also, insurance companies like AIG have been known to insure
these investments and instruments. This way the return of money is also insured. Another important issue is the
lack of audit or inspection. As a result the crisis of today has arised within the loss of real instrumental value and
the existence of accreditor and insurance companies.
4.6 - The Glass-Steagall Act of 1933
The Glass-Steagall Act was enacted in 1933 USA. With the act came the prohibition of bank
transactions within the stock exchange and the use of derivative instruments. However, it’s interesting that this
act was dismissed in 1999 and banks were permitted to transact within the stock exchange and were allowed to
issue derivative instruments (Yıldıray, 2009) .
The crisis of today commenced with the Lehmann Brothers’ September 2007 claim to bankruptcy. The
announcement of the Lehmann Brothers’ bankruptcy, exclaimed exageration, and was the symbol of a company
that went through and failed in an unreal market. After the Lehmann Brothers many investment
companies,insurance companies and corporation giants like GM were left in difficult situations. For example, in
a short time, the value of GM went down from 20 billion US dolars to just 1,8 billion US (Anatolia Agency,
2008).
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For this reason, the crisis of today, is not just a mortgage or investment crisis, but in general a financial
crisis that is affecting the globe. For example, the Foreign Minister of Quwait, in the recent past, has claimed the
loss of 2.5 trillion US dolars in Gulf countries (i.e. Quwait, Dubai, and Katar) exemplifying the magnitude of the
dimensions and spread of the crisis.
5 – Champions and Losers of the Crisis (4 Groups)
Another valuable question, whether or not this crisis arose on its own or if it was knowledgably
controlled? And who are the champions or losers in this crisis? There are three possibilities. The first, is if the
crisis has arisen on its own in an uncontrolled environment? Then the global market has lost as a whole. The
second, the crisis was under control and one of the aforementioned markets won and the other lost, respectively.
The third possibility is that the crisis was controlled and both markets prospered.
In this crisis the winners and losers could go into two groups. The first champions are the ones who
franchised the money press because with the fall of the financial markets came the weakness of the real sector,
the industrial and service sector and other real assests. For example, petroleum at a rate of 150 US$ quickly
falling to 40 US$ stands at a currency rate of 55 US$. At the same rate, a Turkish home valued at 500,000 TL
has fallen to 250,000 TL. For this reason, those who own a money press could benefit from worldly assets, and
can take advantage of offers when costs go down. The second group of winners are those who own a vault and a
desk or those who still use cash. All asset prices fall and when the once valued 20 billion US GM falls to 1,8
billion US, it becomes possible to own.
The first of the losers are factory, corporation, and holding owners. Their losses are in proportion to
their business. In other words, big corporation owners’ losses are greater than those of smaller corporations. For
example, Forbis’s World’s richest people list consisting of Husnu Ozyegin, a rich Turkish Businessman, was no
coincident. Because right before the crisis he was the owner of Finans Bank. Just before the crisis he sold it for
2.7 million US dolars and while he held the money, fresh in his hands, the crisis began. The second group of
losers are those who hold investments. Those who hold shares in American government, corporation or
investment bank stocks would be considered disadvantaged since it is unknown what or whether or not they will
pay or get paid.
6 – What is the duration of the Crisis? Has it hit rock bottom ?
How long the crisis will last and when it will hit rock bottom are important questions to ask. It will end
eventually. When it has hit rock bottom it could bounce back in three ways. Either in a V- shape, a U- shape or a
W- shape with the later two possibilities it could end for good. Three possibilities are in question. The first
option, if the two global market actors have won and they are in gain (have profit), the crisis will last 1-2 years,
hit rock bottom in 2009 and bounce back in a V-shape. The second possibility, if the two global market actors,
one winning and the other losing, the crisis will last 3-4 years hitting rock bottom in 2009-2010 and will come
back in a U-shape. The third option, is if the global market actors are both in the red then the crisis could last 510 years hit rock bottom in 2015 return in a W-shape and possibly cause war.
The world by the end of 2007 and in Turkey since October of 2008 has recorded global economic
information on a a daily basis. With this information we have composed a global crisis journal. If we were to
look at this journal we would see that upto mid April of 2009 we have recieved only negative news reports.
However, with the bad news upto mid April we have recieved few but good reports after this date. In our
opinion, not only in Turkey but in the world the crisis has not ended but has come closer. The bottom of the well
and the end of the tunnel are visible. With positive good news, alongside the wide spread (bad) news like the
bankruptcy of corporations, joining of corporations, and the sale of corporations, we will hit the bottom of the
crisis.
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Shape V
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
Figure 1: Shape V
Shape U
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2006
2007
2008
2009
2010
2011
2012
Figure 2: Shape U
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Shape W
1
0.9
0.8
0.7
0.6
0.5
0.4
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Figure 3: Shape W
Consequences of the Crisis
1- Security Problems in the Market
The first consequence of the crisis is the issue of security and trust. With the initiation of the crisis the
entire world suffers from a lack of trust and security. At the moment individuals have a difficult time trusting
each other. For example, banks have no trust corporations they do not give out loans. In the same frame no one
relies on checks. People do not trust each other. As a result trust in global terms is at a loss.
2- Negative expectations
The second consequence of the crisis is the negative affect on expectations. Individuals choice to not
consume products has a negative effect on the economy. As a result prices of goods have gone down. Moreover,
it may be said that we could be faced with a deflation.
3 – Consequences around the globe
The third consequence could arise among countries. Developed countires are foreseen to be more
influenced in comparison to developing or non-developed countries. For example, the US, the UK, France, and
Germany, will be the most influenced countries while Turkey is seen as a country that will be less affected by the
crisis. Thus, Nigeria, Sudan and similar countries will be less influenced. The reason behind this is that their
integration in the world economy is less, compared to the others.
The fourth consequence of the crisis is in countries where export is more than imported products which
would have a negative effect on the economy. Countries where export is greater than import will suffer with the
weakening of global trade. For example, countries like Japan, China, and Germany. The most disadvantaged are
especially Japan and China where their economies are dependant on export. Another effect of the crisis is in
regard to global national profit of 60 trillion US$ has decreased to 30-40 trillion US$.
4 – Effects on Turkey
Because this global financial crisis has its roots in America and Europe the arise of the crisis in our
country should not be the fault of the governement. The responsibility of our government takes place after the
fact. In other words, the government has the responsibility to take care while in crisis. As a result, our
government is not at blame for the crisis however, if the crisis has had negative effects the government should be
questioned. If there are consequences and negative outcomes as a result of the crisis then the government should
be held responsible and could it could be said that they were not capable of directing the country.
This crisis is considered to be a world financial crisis. When global financial sectors crash, banks and
then industrial sectors begin to go bankrupt. This situation did in not take place in Turkey but has taken on an
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interesting twist. In Turkey no bank goes bankrupt, but in 2008 every bank has made a profit and to say that that
there is a financial crisis would be false. However, there is an industrial and real sector crisis. In comparison to
the world crisis, Turkey’s prosperous financial sector demonstrates an awkward turn of events in the industrial
and real sectors.
The reason for this is financial cuts and the existence of foreign banks not giving loans. As a result the
prime minister stated that the crisis would be mild over the country and not allow it to break down, but the crisis
has more than skimmed over the industrial sector. The difference between the world crisis and the one in Turkey
is based on the holding of funds from the financial to the industrial and business sectors. However, because the
industrial sector has lost profit and unemployment has gone up the financial sector will soon negatively be
affected as well.
The low flexibility of essential products such as bread and rice will not be much affected by the crisis.
However, sectors that produce furniture, computers, and automobiles, products with high flexibility, will be
influenced. To say that the crisis will be mild in the industrial and business sectors is an over statement.
The high quantity of foreign banks in Turkey is the internal cause of our crisis. Moreover, the 2001
crisis, in terms of Turkish banking systems, had positive outcomes. However, because of the abnormal number
of foreign banks in Turkey, a normally disadvantageous crisis has become much more.
Solution Suggestions
Solution suggestions could be grouped into 3:
1. what the world needs to do
2. what Turkey needs to do,
3. what corporations need to do,
1- What the world should do
I would like to tell a economic story. First we should accept that the crisis arised because of fictional
money concept, not real cash money. Therefore, fictional money should be eliminated. The USA achieved that in
1933 and 1934 with precautionary measures. However, in 1999, to produce virtual money those precautionary
measures legal acts abolished, thus the crisis was unavoidable. For this reason the development of virtual money
and ties to derivative instruments have been forbidden. Another problematic point is that the world trade is done
in Euros and US funds. The use of specific currencies gives those countries undeserved distinction and authority.
For example, America can press its own currency as it wishes and in return buy goods and services from the
whole world. In the same way, those countries involved in world trade prefer to use US dolars.
For this reason, the system is rotten and has been observed to fail. Therefore, a central world bank
should be established or the United Nations should establish a currency that can be used worldwide.
In other words, there should be an international currency used worldwide. For this to be realized, every
country’s contribution to the world national profit should be considered. For example, the contribution of the US
to the world national profit is 14 trillion US. Turkey’s contribution is 700 million US. Every country does not
contribute equally the currency profit is based on an individual basis. Thus, the whole world’s contribution and
control over one currency would provide a trustworthy monetary system, thus, soon there will be more insight
into this area. There is postive feedback on this topic. For example, the most recent G-20 meeting in Russia
claimed such an offer. In the same concern, China also made similar requests. The first commentary on these
requests was made by the US because it would be hazardous to its own wealth.
2-What Turkey Should Do
In summary Turkey should use precautionary measures. The ending of the crisis should be foreseen. To
reach this goal, consumption must be re-originated because of the reduced demand caused by unemployment and
negative expectations. Reduced consumption and demand causes no sales or production by factories. Therefore,
they dismiss employees. Unemployed individuals induce a reduction on consumption and demand. This is a
vicious circle that should be eliminated. The worldwide economy gets diminished. Economic graphs demonstrate
a decrease of profits. Urgently, Turkey should take precautionary measures. Turkey should convert its own
economic graphics into a V or U-shape.
Turkey must be one of the first countries that should do this. There are three steps; first, the crisis has
ended the campaign by the media. It must furnish a secure enviroment and positive expectations into markets.
Due to negative expectations those who have money do not spend it.
The second is to increase the money supply. It has to be handled with foreign funds or with the pressing
of money by a central bank. With the increase of money supply, real sector must be supported. This will increase
production and investment. Moreover, an increase of money supply would increase demand and consumption.
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A third step is for the government to cut taxes and make compulsory levy cuts or payment should be
delayed. Consequently, money will still be in the market, indirectly, and the money supply will increase. Here
we should be careful about liquid deficit. If, there is no secure environment and positive expectations in markets,
liquid afflux will cause deficiency. If liquidity increases through foreign funds, the Turkish Lira will gain value.
With the central bank pressing money inflation will arise.
To eliminate these risks, national products should be produced and consumed. In other words, importance should
be given to national goods and industry not foreign goods. How we are going to do that.
3- What Corporations Should Do
1.
2.
3.
4.
5.
6.
7.
8.
9.
They have to guess the rock botoom of the crisis. And they have to rearrange their budgets.
Their budgets should be based on a six month period not one year.
They have to reduce credit loans. They have to give more importance to their equity capital. It means
they could be lessen.
They have to produce and sell products that are in demand and whose flexibility is less than others.
Expenses should be reduced in a quick manner because earnings and revenue will decrease.
They have to find new customers and markets.
They have to organize campaigns in order to increase demands and consumption of consumers.
They have to increase efficiency of the work place and labour forces.
Functional flexibility should be increased.
References:
Anatolia Agency. (11 Kasım 2008).
Đncekara, A. (2009). Küresel Kriz ve Türkiye Ekonomisi. Đstanbul.
Seyidoğlu, H. (2003). Uluslar arası Đktisat. Gizem Can Yayınları, Đstanbul.
Tahran, V. (2008). Global Kriz ve Türkiye. Tisk Sosyal Politika Toplantıları, Đstanbul, 5 Kasım 2008.
Tuduk, M. ( 2008). Referans Gazetesi, 12 Aralık 2008.
Yıldıray Y. (2009). Mortgage Krizi. Đstanbul.
258
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Title
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Global Crisis: Consequences and Solution Possibilities
Author
Author
YAVUZ, Arif
Abstract
A summary of the resource.
In this paper, the reasons and solutions of the 2008 global economic crisis are discussed. In the first part, a comparision of 2008 global crisis with 1929 economic crisis, the effects of each and also the differences are explained. The champions and the losers of the current crisis are interpretted. Also, the estimated duration and the expected end time of the crisis are discussed. In the second part, the effects of the crisis to the Global Economy and to some of the countries are stated. The expected effects can be summarised as, “losing of confidence in global market”, “having negative prospects”, “decreasing of the foreign trade”, “shrinking of the national incomes” ,“shrinking of demand and consumption”, “increasing of unemployment”. In the last part, some solutions for negative effects of global crisis are offered. A world economic story is stated and suggested a new International Money Currency. Restrictions for the virtual Money is recommended and also some new rules on international trade and international finance system are offered.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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https://omeka.ibu.edu.ba/files/original/5f827a5dca1024f1150f03a25fcc32c3.pdf
e41920e1e88d55713b6089842ec476ef
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Macroeconomic Effects of Interest Rate Liberalization:
The Case of Turkey
Talat ULUSSEVER
Department of Finance and Economics, College of Industrial Management
King Fahd University of Petroleum & Minerals, Dhahran, Saudi Arabia
talat@kfupm.edu.sa
Abstract: This study proposes a financial computable general equilibrium (CGE) model,
which represents the salient features of the Turkish economy. By including 15 production
sectors and linking the real and financial sub-models through various channels of fund flows,
interest rates, commercial bank intermediation, monetary and fiscal policies, we perform a
counterfactual simulation using the financial CGE model to explore the potential
macroeconomic effects of interest rate liberalization in the Turkish economy. Our results show
that interest rate liberalization makes the government and the enterprises suffer a revenue loss,
but households slightly and commercial banks notably revenue raise in both the short and long
run. In addition, while the real GNP declines in the short run, it increases in the long run after
the wage level has been adjusted fully and the employment effect has been eliminated.
Keywords: Interest Rate Liberalization, the Turkish Economy, Financial Computable General
Equilibrium
Introduction
It is a well known fact that 1980's witnessed liberalization movements all over the world. In line with
this wave, the Turkish economy also launched and implemented the structural adjustment and liberalization
program starting at the beginning of 1980 and achieved a notable improvement. The main purpose of this
program was to increase the role of market mechanism in the allocation of resource by opening up the economy
and reducing the state's role in the economic activities and transforming the distressed financial structure into a
market-based system by aiming the commercialization of the banks, creation of more competition, liberalization
of interest rate, central bank independence, development of monetary policy framework, liberalization of
international trade and capital movement.
Prior to 1980 structural adjustment and liberalization program, direct control methods were used in
macroeconomic management and resulted in relatively large fluctuations in the economy, the state-owned
enterprises became loss-making and relied on subsidized bank loans to keep operating, and the state–owned
bank credits were allocated to the state policies rather than market principles.
As a result of those economic policies, the Turkish economy had the following facts;
• Interest rates control by the state: In contrast with the case of assuming functioning markets,
controlled interest rate becomes insensitive to market fluctuations and the allocation of credits become
inefficient.
• An over-concentrated financial system: The state banks made loans according to the government
policy rather than the market principles. Thus, while the state-owned sectors take a larger portion of the bank
credits and investment resources, their output growth is slower than that of the non-state sectors.
• Bank-enterprises debt problem: Due to the difficult situation of the state-owned enterprises, the
objective of the government became to keep the state-owned sector going. Otherwise, the disturbance on the
economy and the increase in unemployment could pose a threat to social stability. Thus, of the state-owned
banks is deeply affected by the condition of state-owned enterprises.
In this study, we focus on the first problem mentioned above and try to see what happens if interest
rate is not controlled by the state rather it is determined by the market forces. Thus, the main purpose of this
study is to explore the potential macroeconomic effects of interest rate liberalization in the Turkish economy.
A computable general equilibrium (CGE) model, which mirrors the salient features of the Turkish
economy with a financial sector, is formulated. In the model, the economy initially adopts a fixed interest rate
regime, and then the fixed interest rate regime is liberalized to observe the potential macroeconomic impacts
and the effects of freeing interest rate on economic agents.
The plan of the paper is as follows: Section 2 provides literature review and data requirements of the
model including parameter estimations. Model specifications are explained in detail in section 3. Finally,
section 4 offers the simulation results.
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Literature Review and Data Requirements of the Model
More than two decades applied general equilibrium models, also known as computable general
equilibrium (CGE) models, have been used to study the effects of taxes, tariffs and other policies. A number of
CGE models have been previously used for the Turkish economy. Those are Dervis, De Melo, and Robinson
(1982), Grais, De Melo, and Urata (1986), Lewis and Urata (1983, 1984), and Yeldan (1989, 1990). They
worked on a wide range of policy concern over the impact of macro stabilization, trade policy and structural
changes on various aspects of the Turkish economy such as poverty, income distribution and economic growth.
Besides the studies on poverty, income distribution and economic growth, financial CGE models were
also formulated for the Turkish economy to investigate the financial policy issues. Lewis (1994) constructed a
financial CGE model to demonstrate that financial liberalization through interest rate reform usually does not
increase fixed investment much, since deposit rate increases are often matched by borrowing rate increases.
Yeldan’s (1997) model tries to investigate the effects of Turkish financial liberalization reforms on the real
economy. Tunc (1998) analyzes the interactions between real and financial sectors of the Turkish economy.
There is a consensus among the CGE modelers that the data set that meets those requirements is the
Social Accounting Matrix (SAM), which provides the most comprehensive and consistent data for creation of
any CGE model. In other words, the most important part of the data required in CGE models is attained by
constructing the SAM. Incorporation of the financial sector into the CGE model requires a financial SAM for
the base year by using various financial data such as balance sheets of monetary institutions, sectoral capital
stocks, and sectoral bank loan data. The financial SAM we used in this study is a slightly modified version of
Tunc (1998).
Every agent’s behavior embodied in the CGE model is reflected by the parameters, especially slope
coefficients, and the specification of equations. We mostly used the parameter values estimated by Yeldan
(1997).
Financial CGE Model for Turkey
We assume that production sector produces according to constant returns to scale production function.
We further assume that the labor market is neo-classical. Capital stock is sector-specific and fixed in the shortrun. Then, the production function can be written, in general form, as:
XDi(Li,Ki,Vji)=min{(1/a0i)VAi(Li,Ki),(V1i/a1i),(Vji/aji)}
(1)
where (XDi) is output of production sector i, (a0i) is the value-added requirement per unit of sectoral output,
(VAi (Li ,Ki)) is value-added, (Li) is labor input by sector in number of persons, and (Ki) is capital stock by
sector., (Vji) is the physical quantity of intermediate input from sector j to sector i (i,j=1,2,3,…15), and (aji)
represents the fixed input-output coefficients.
Value added in each sector is produced using two primary factors of production, labor (L) and capital
(K) according to constant returns to scale Cobb-Douglas production function:
VAi = αi Liβi * Ki1-βi
(2)
where (αI) is a constant, which represents the production function shift parameter of gross domestic
output, (βi) is production function share parameter of labor, (1-βi) is production function share parameter of
capital. In other words, sectoral domestic output (XDi) is determined by Cobb-Douglas production function
with labor and capital.
XDi = αi * Liβi * Ki1-βi
(3)
Given the Cobb-Douglas production function and the profit-maximization assumption about the
enterprises, the share of each input in the value of output will be equal to the elasticity of output with respect to
the input concerned. This relationship is used to obtain the values of βi by substituting the cost (the valueadded) of labor from the input-output table into the labor demand equations.
Labor demand (LDi) is derived from the first-order condition of the production function where the
value of marginal product is equal to the price of labor.
LDi = XDi [(βi*PVi) ⁄ (WL*wfdist)]
2
(4)
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where (PVi) is value added or net price, (WL) is average wage level, (wfdist) is variable labor market
distortion parameter. The parameter of (wfdist) allows for labor market distortions and wages in different
sectors to deviate from the average wage. Labor market closure rule applies to the labor supply specifications.
We assume that labor wages are free to adjust to maintain full employment given a fixed total labor supply,
which is a classical closure.
L = Σ LDi
(5)
However, wages are rigid in the short-run and will only partially adjust, which is a Keynesian closure.
The average nominal wage level relies on the change in real GNP and the price inflation, and employment
varies negatively with the real wage level.
WL=WLt-1*[ ω0+ ω1*(RGNP/RGNPt-1)+ ω2*(1+PINF)]
(6)
where (WLt-1) is average wage level of last period, (ω0) is constant term of wage equation, (ω1) and
(ω2) are parameters of wage equation, (RGNP) is real gross national product, (RGNPt-1) is the real gross
national product of last period, and (PINF) is inflation rate.
GNP deflator is used for general price index (PLEV) for the economy. Then, PLEV is equal to nominal
gross national product or value added in market prices (GNPVA) divided by real gross national product
(RGNP).
PLEV = GNPVA / RGNP
(7)
The price inflation rate (PINF) is computed as general price index this year divided by general price
index last year minus 1. Given that money is used as the numeraire, price changes are obviously absolute
changes (not relative changes as in the real CGE models), and we can examine the price inflation directly from
the price level changes. If price level change is negative (positive), we can subtract (add) it from (to) the last
year price inflation rate to find this year price inflation rate
Household demand for goods (Ci) is a linear expenditure system and equal to the total value of
household consumption (CONhh) times households consumption expenditure share (clesi,hh) divided by
composite (domestic and imported) good price (PQi);
Ci = (Σclesi,hh * CONhh) / PQi
(8)
The total value of household consumption (CONhh) is determined by household nominal income (YHhh)
modified by household income tax (htaxhh) and household savings rate (SAVhh);
CONhh = YHhh * (1- htaxhh) * (1-SAVhh)
(9)
Government demand for final goods is defined through multiplying a set of fixed shares, government
expenditure share (glesi), with aggregate real government spending (gexp).
Gi = (glesi * gexp * PLEV) / PQi
(10)
Households income comes from labor earnings (LYhh), the foreign remittance (RMT) and government
transfer (GThh,g), price subsidies (SUBhh,g). In addition, households keep financial assets, and receive interest on
enterprise bond (IEBh,ep), and bank deposits (IBDhh,b).
Yhh=LYhh+RMT*ER+SUBhh,g+IEBh,ep+IBDhh,b+GThh,g
(11)
Households pay part of their total income (Yhh) as income tax at the rate of (thh) to the government.
Thh = thh*Yhh
saving.
(12)
The leftover will be the household’s net income. That net income is divided between consumption and
The total amount of household savings depends on the total income as well as the savings rate (shh),
which has positive relation with the average real rate of return of investment.
shh = khh (irchh – infr)
(13)
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where (khh) is a parameter that measures the responsiveness of the household savings rate to a change in
the average real rate of return, (irchh) is a composite interest rate determined as a weighted average rate of return
of financial assets-treasury bonds, enterprise bonds and time deposits, and (infr) is price inflation. After netting
the price inflation out, we reach the real rate of investment return (irchh – infr). Households now decide how
much they will save or consume by considering the rates of return of various investment opportunities.
The total amount of savings in the current period is obtained by multiplying the savings rate with the
total net income. Then it is allocated among different savings options: money demand for transactions and other
purposes (MDhh), financial assets; enterprise bonds (EBhh), time deposits (TDhh), and housing investment,
computed as a fixed share (househh) of the savings.
Shh = shh Yhh = MDhh + EBhh + TDhh + househh
(14)
The household demand for money is a transaction-based interest-elastic money demand function.
MDhh = λhh* Yhh*(1 + ir – infr)-η
(15)
where (λhh) is money transaction demand factor, (ir) is interest rate, and (η) is interest elasticity of
money demand.
The function gives the current period stock of money demanded by household, (MDhh). Money
demand consists of currency and demand deposits. Currency deposits (CDhh) and demand deposits (DDhh) take
up fixed proportions of the total money demand.
CDhh = cshh * MDhh
DDhh = (1 - cshh )* MDhh
(16)
(17)
where (cshh) is proportion of money held as currency by households.
By subtracting the last period’s stocks of currency and demand deposits from the current stocks, we get
the changes in currency and demand deposits.
ΔCDhh = CDhh - CDhh, t-1
ΔDDhh = DDhh - DDhh, t-1
(18)
(19)
If we sum both up, we get the change in money demand (ΔMDhh) that is part of the household savings.
ΔMDhh = ΔCDhh + ΔDDhh
(20)
Income of enterprises mainly comes from participation in the production of goods and services
(XDi*PXi). In addition, enterprises own deposits and treasury bonds so that they get interest on enterprise
deposits (IBDep,b), interest on treasury bonds (ITBep,g). Enterprises get the transfer from government (GTep,g) as
well.
On the other hand, enterprises spend on the provision of goods and services (epegs) and fixed
investment (epefi). Moreover, since enterprises borrow funds from other economic institutions through bank
loans and issuing of enterprise bonds, they have to pay interest to households (IEBh,ep) and commercial banks
(IBLb,ep). Thus, the income equation of enterprises will become as follows;
Yep = (XDi*PXi) + IBDep,b + ITBep,g + GTep,g + SUBep,g - (epegs+epefi)*PL – IEBh,ep – IBLb,ep
(21)
Enterprises pay income tax (Tep) to the government with the proportion of their income.
Tep = tep * (Yep - δKep)
(22)
where (tep) enterprise income tax rate, (δ) is capital depreciation rate, and (Kep) is capital stock of
enterprises.
Deducting the income tax of enterprises from enterprises income, the remaining part will be the
enterprise savings (Sep).
Sep = sep* (1- tep) * Yep
(23)
where (sep) is enterprise savings rate.
Enterprise savings generally support part of the expenditures. If the sources together cannot cover all
the expenditures, enterprises have to borrow from other economic institutions. In other words, if there is
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
negative savings, which means the total expenditure is greater than the total sources, this gap constitutes the
credit requirement of enterprises. A positive credit requirement indicates that enterprises need to borrow
through borrowing banks loans, and issuing enterprise bonds.
The government enters the model through its revenue, expenditure and deficit activities. The
government revenue (GR) is comprised of mainly a variety of taxes: tariffs (TF), household income taxes (Thh),
enterprise income taxes (Tep), indirect taxes (Tind), and interest payments of government deposits in central bank
(IGDg,cb).
GR = TF + Thh + Tep + Tind + IGDg,cb
(24)
Among the government expenditures, the two largest items are the spending on the provision of public
goods and services (gegs) and fixed investment (gefi). Both are fixed in real values. Moreover, the governments
spends on interest of foreign borrowing (IFBrow,g), interest of treasury bonds to enterprises (ITBep,g), transfers to
enterprises (GTep,g), and households (GThh,g), subsidies to the money loosing enterprises (SUBep,g) and price
subsidies on consumption goods to households (SUBhh,g).
GE = (gegs+gefi)*PL + IFBrow,g*EXR + ITBep,g + GTep,g + GThh,g + SUBep,g + SUBhh,g
outflow.
(25)
where (PL) is price level, (EXR) is exchange rate, and (cosg) is government share of current capital
When the government’s total expenditure exceeds its revenue the government has to find extra fund
(government borrowing) to finance its deficit. The government fiscal deficit (GFD) equals its expenditure minus
its income.
GFD = (gegs+gefi)*PL + IPFBrow,g*ER + ITBep,g + GTep,g + GThh,g + SUBftcg + SUBep,g + SUBhh,g + (26)
TF-Thh - Tep - Tind - IGDg,cb
When the government faces a deficit, there are three ways to finance it.
First, the government can borrow from the central bank.
ΔCBCg,cb = µ2 * GFD + ΔGD
(27)
where (ΔCBCg,cb) is the change in central bank credits to government, (µ2) is the share of deficit
financed by central bank credit, and (ΔGD) is change in government deposits. This method is the easiest way to
finance government deficit. Yet, this method increases the money stock and jeopardizes the money control
function of the central bank.
Second, government can issue the treasury bond.
ΔTSTB = µ1 * GFD
(28)
where (ΔTSTB) is the change in supply of treasury bonds, (µ1) is the share of deficit financed by
treasury bonds.
Third, the government can borrow from the foreigners. This method might increase the national debt to
the foreigners and affects negatively the balance of payments.
Since we impose the government deficit, we will explicitly incorporate the decision of financing deficit
into model using two-policy parameters µ1 and µ2 that represents the share of government deficit financed by
treasury bonds and by central bank loans respectively. The remaining part, equal to (1- µ1 – µ2), will be financed
by foreigners.
Incorporating the banking sector into the model is one of the most important characteristics of financial
CGE models. The banking sector of the model represents the functions of the central bank and the commercial
banks. The central bank is the authority of monetary policy. The commercial banks are the financial
intermediaries. They channel the savings of households and enterprises in the form of bank deposits to
borrowers as loan.
Since the commercial banks lend out bank loans and put reserves into the central bank, the income
equation of commercial banks is little bit different from other sectors. The commercial banks receive interest on
bank loans from enterprises (IBLb,ep), interest on treasury bonds from government sector (ITBb,g), and interest
on bank reserves from the central bank (IBRb,cb). If it is the case, they can get foreign trade earn a profit on trade
(bπftc). Then, the income equation of commercial banks becomes;
Yb = (IBLb,ep) + ITBb,g+ IBRb,cb+ bπftc
(29)
5
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
On the expenditure side, the commercial banks pay interest on bank deposits to household (IBDhh,b)
and enterprises (IBDep,b). Since commercial banks borrow from the central bank, they pay interest on central
bank loans (ICBcb,b).
Eb = IBDhh,b + IBDep,b + ICBcb,b
(30)
The equation below shows the financial intermediation function of the commercial banks. The savings
of households and enterprises in the form of bank deposits are channeled to borrowers as loans.
ΔBL = ΔDDh + ΔDDep + ΔTDhh + ΔTDep - ΔBR
(31)
This equation simply says that the changes in total bank loans (ΔBL) is equal to the changes in total
demand deposits of households (ΔDDhh) and enterprises (ΔDDep) plus the changes in total time deposits of
households and enterprises (ΔTDhh) + (ΔTDep) minus the changes in total bank reserves (ΔBR).
The commercial banks have to reserve a certain portion of their deposits in the central bank account.
The equation below indicates that the total reserves of commercial banks (BR) deposited in the central bank
account is equal to the total stock of demand deposits (DDhh + DDep) and total stock of time deposits (TDhh +
TDep) with the ratio of reserve to commercial banks (rrb).
BR = rrb (DDhh + DDep + TDhh + TDep)
(32)
To see authority of monetary policy function of the central bank clearly, we should introduce money
base equations. Change in money base (ΔMB) is used to measure the money supply and defined as the
household currency demand (ΔCDhh) and enterprise currency demand (ΔCDep) plus the total bank reserves
(ΔBR).
ΔMB = ΔCDhh +ΔCDep + ΔBR
(33)
It is obvious that if the money multiplier is constant, money supply will be affected by the change in
the money base in the same direction. That means the central bank credits to the government is an injection of
money into the economy, and this injection will expand money base.
Simulation Results1
In the simulation result table below, we show nominal and real changes in the macroeconomic and
financial variables as a result of freeing the interest rate. Since the central bank credit to enterprises and
commercial banks stays at the original level as in the baseline situation, the simulation results show the pure
effects of interest rate liberalization. Thus, there is no shift in monetary policy and what we see is a pure effect
of interest rate liberalization.
As it is seen from the simulation results, the price level drops by 1.33% in the short run and 1.95% in
the long run. Notice that a drop in the price level does not mean there is no inflation. The price level of the base
run is normalized to one, and the inflation rate is 60.3% initially. To see the price inflation level, we should
examine the item "price inflation rate" in the macro and financial variable tables. This fall in the price level at
the same time means that the inflation rate has gone down by about two-percentage point, from 60.3% to
58.97% in the short run and to 58.35% in the long run. For the other nominal variables shown in the tables, the
change in the price level is a point of reference to compare with to get some ideas about the change in real
values. Throughout all discussions we will check the changes in the real values of variables when they are
necessary. In this case, as an example, the price level decreases by 1.33 % in the short run and thus for any
nominal variable its value decreases by less than 1.33% in the short run, there is actually an increase in the real
value.
A drop in the price level proposes that the real wage level has risen, and thus, employment in the short
run has fallen by 0.9% or unemployment increased by 171 thousands (by assumption only the short run has
employment effect). A result of the drop in employment is that the real GNP decreases by about 0.3% in the
short run. However, the story changes in the long run after the wage level has been adjusted fully and the
employment effect has been eliminated. As seen in the table 1, in the long run, the real GNP increases slightly
by 0.2%. From this simulation result, it can be concluded that interest rate liberalization, in fact, has slightly
1
Simulation results were obtained by using Generalized Algebraic Modeling System (GAMS) program.
6
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
improved, even if it is very small, the efficiency of the economy. Given that the capital stock is fixed, the
increase in real GNP or production efficiency has to come from the reallocation of labor among sectors.
In both the short and the long run, the nominal interest rate goes up even though the general price level
falls, and the combined effect of the two gives rise to a jump in the real rate of interest by more than threepercentage point from 2.4% to 5.63% in the short run and to 5.45% in the long run. It should be remembered
that freeing the interest rate allows the loanable funds market to reach the equilibrium and rationing of credit
funds is no longer needed. Indeed, the leap in the real rate of interest is one of the mechanisms working towards
equilibrating the financial and loans markets. The nominal total income of households falls by 0.95% in the
short run and 1.03% in the long run. Yet, by taking the change in the general price level into account, the real
income has actually risen in both the short and long run. Total nominal households income as a percentage of
the GNP rises slightly from 85.6% to 86.25% in the short run and to 86.3% in the long run. Theoretically
speaking, the saving behavior of households is expected to change due to the rise in the real interest rate. In line
with the theory, our simulation results show that the nominal gross saving of households goes up even though
the price level has fallen, and the result is an increase in the real savings around 4.7%, as indicated by the
increase of savings as a percentage of the GNP, from 19.3% to 20.2% in both the short run and the long run.
Furthermore, households compress their real consumption and lower their demand deposits. Money holdings
decreased by 3.3% and 4.6% in the short run and long run respectively while time deposits increased by 9.1%
and 9.74% in the short run and long run respectively. Thus, the households build up their time deposits directly
as well as converting their money holdings into the interest earning deposits.
Regarding the fiscal condition, government revenue drops in both the short and the long run. The
nominal revenue decreases by 2.3% in the short run and 2.03% in the long run. Since the percentage of
government revenue fall is larger than the price level change in both the short and the long run, government
revenue decreases with not only nominal terms but also real terms. This real revenue decrease is also reflected
in the decrease of government revenue measured as a percentage of the GNP from 21.1% to 20.95% in the short
run and to 21.03% in the long- run. On the other hand, government expenses decrease by 0.4% in the short run
and 0.2% in the long. Those expenses decreases are less than the price level change in both the short and the
long run. Combining effect is that budget deficit or government borrowing requirement increases by 7.42% in
the short run and 7.17% in the long run.
The results show interesting outcome for enterprises. While the liberalization leads to more fixed
investment, it hurts enterprises by lowering their net income for 2.19% in short run and 2.04% in the long run.
That means real net income decreases in both the short and long run. The reduction in net income is largely due
to the increased interest payments on the stock of enterprise loans. On the other hand, real fixed and total
investment rises in the short and long run. In order to support a higher level of fixed investment, enterprises
have to increase their borrowing in the current period — enterprise bonds issued goes up by 2.3% in the short
run and 2.5% in the long run, and domestic bank loans goes up by 2.5% in the short run and 2.9% in the long
run.
The most fascinating results were obtained in the banking system comparing to households and
enterprises. The increased credit demand of enterprises causes 2.5% increase in short run and 2.9% in the long
run in the amount of bank loans to enterprises made in the current period. Besides, the increasing real interest
rate coupled with the impact on household saving behavior causes the amount of demand deposits made in the
current period to decline by 2.6% in the short run and 2.2% in the long run. On the other hand, in line with
theory, increasing real interest rate causes the amount of time deposits to go up by 6.02% in the short run and
6.87% in the long run. Furthermore, a higher nominal interest rate means that interest payments received and
paid by banks rush forward drastically. Thus, the total income of commercial banks rises substantially by 25.4%
in the short run and 23.7% in the long run. On the other hand, the total bank expenses jump by 13.5% in the
short run and 9.5% in the long run.
To summarize, the following remarks can be concluded:
1. The simulation results show that while the government and the enterprises suffer a revenue loss,
households slightly and commercial banks substantially gain from freeing the interest rate. This
differential impact on the incomes of economic agents depends to a large extent on the initial
distribution of financial assets and liabilities.
2. When interest rate is liberalized, we observe the income transfers from borrowers to lenders, and thus
lenders tend to gain but borrowers to lose. Since main borrowers are enterprises and government, their
net incomes decrease in he short and long run.
3. However, real net income of enterprises is getting better from the short run to the long run. While price
level decrease from the short run to the long run is 0.62%, the decrease in net total income of
enterprises is just 0.15%. Speaking with real terms enterprises are getting better from the short run to
the long run even if their real net income is decreasing in both the short and long run. This situation
would be explained by the increasing productivity of enterprises in the long run after interest rate
liberalization takes place.
7
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
4.
5.
6.
7.
The simulation results of interest rate liberalization indicate that the fixed interest rate system before
liberalization is putting a squeeze on especially the banking sector by protecting the benefits of and
maintain the status quo in other institutions.
When the long run is compared to the short run, we see an increase, even if very small, in the long run
real GNP while we have a decrease in the short run.
Another important observation is the increase in the government-borrowing requirement as a
percentage of the GNP in both the short and the long run. This result is similar to the context of
enterprise. Since government is also borrower, increasing real interest rate is increasing government
borrowing.
The long run results suggest that some adverse effects associated with freeing the interest rate are
reversed when a full adjustment is reached. Government and enterprises enjoy with low interest rate
under fixed interest rate regime, while freeing the interest rate make household slightly and banking
sector substantially better.
Simulation Results
INTEREST RATE LIBERALIZATION
MACRO AND FINANCIAL VARIABLES
(Billion TL)
Price Level
Price Inflation Rate (%)
Nominal Interest Rate (%)
Real Interest Rate (%)
Employment (thousand)
Wage Level (million TL/year)
Real GNP
Nominal GNP
Government
Revenues
Revenues as % of GNP
Expenditures
Expenditures as % of GNP
Deficit
Deficit as % of GNP
Households
Total Nominal Income
Total Nom. Inc. as % of GNP
Total Real Income
Total Savings
Savings as % of GNP
Nominal Consumption
Nom. Cons. as % of GNP
Real Consumption
Demand Deposit
Time Deposit
Enterprises
Net Total Income
Working Capital
Total Investment
Real Fixed Investment
Demand for Credit
• Enterprise Bond Issued
• Bank Loans Borrowed
Commercial Banks
Total Income
Total Expenses
Bank Loans to Enterprises
Total Bank Loans
Total Deposits
•
Demand Deposits
•
Time Deposits
8
Short run
Long run
Base
1.0000
60.30%
62.70%
2.40%
18,539
5,768
395,042
395,042
Value
0.9867
58.97%
64.60%
5.63%
18,368
5,701
393,840
388,602
%�
-1.33%
-2.21%
5.58%
135%
-0.9%
-1.16%
-0.3%
-1.63%
Value
0.9805
58.35%
63.80%
5.45%
18,539
5,680
395,848
388,129
%�
-1.95%
-3.23%
3.99%
127%
0.0%
-1.53%
0.2%
-1.75%
83,317
21.1 %
103,867
26.3 %
20,550
5.2 %
81,396
20.95%
103,470
26.6%
22,074
5.68%
-2.3%
-0.71%
-0.4%
1.14%
7.42%
9.2%
81,629
21.03%
103,652
26.7%
22,023
5.67%
-2.03%
-0.33%
-0.2%
1.52%
7.17%
9.04%
338,379
85.6 %
338,379
76,173
19.3 %
262,206
66.4%
262,206
5,261
29,640
335,173
86.25%
339,691
78,565
20.2%
257,608
66.3%
261,080
5,086
32,345
-0.95%
0.76%
0.39%
3.3%
4.7%
-1.75%
-0.15%
-0.43%
-3.3%
9.1%
334,893
86.3%
341,553
78,451
20.2%
256,442
66.1%
261,542
5,017
32,527
-1.03%
0.82%
0.94%
3.1%
4.7%
-2.2%
-0.45%
-0.25%
-4.6%
9.74%
229,194
1,363
68,564
65,888
38,766
6,273
32,493
224,153
1,323
69,389
66,553
39734
6,419
33,315
-2.19%
-2.93%
1.2%
1.0%
2.5%
2.3%
2.5%
224,521
1,329
69,658
66,994
39,860
6,431
33,429
-2.04%
-2.49%
1.6%
1.68%
2.8%
2.5%
2.9%
44,308
39,179
32,493
76,261
93,928
29,295
64,633
55,560
44,485
33,315
77,176
97,066
28,536
68,530
25.4%
13.5%
2.5%
1.2%
3.3%
-2.6%
6.02%
54,821
42,917
33,429
77,325
97821
28,647
69,074
23.7%
9.5%
2.9%
1.4%
4.1%
-2.2%
6.87%
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
References
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Bourguignon, F., and Morrison, C. (1992). Adjustment and Equity in Developing Countries, Paris, OECD.
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Lewis, J. D., and Urata, S. (1984). Anatomy of a Balance of Payment Crisis: Application of a General Equilibrium Model to
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Lewis, J. D. (1994). Macroeconomic Stabilization and Adjustment Policies in a General Equilibrium Model with Financial
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Shoven, J. B., and Whalley, J., (1992). Applying General Equilibrium, Cambridge University press, Cambridge.
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9
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Title
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Macroeconomic Effects of Interest Rate Liberalization: The Case of Turkey
Author
Author
ULUSSEVER , Talat
Abstract
A summary of the resource.
This study proposes a financial computable general equilibrium (CGE) model, which represents the salient features of the Turkish economy. By including 15 production sectors and linking the real and financial sub-models through various channels of fund flows, interest rates, commercial bank intermediation, monetary and fiscal policies, we perform a counterfactual simulation using the financial CGE model to explore the potential macroeconomic effects of interest rate liberalization in the Turkish economy. Our results show that interest rate liberalization makes the government and the enterprises suffer a revenue loss, but households slightly and commercial banks notably revenue raise in both the short and long run. In addition, while the real GNP declines in the short run, it increases in the long run after the wage level has been adjusted fully and the employment effect has been eliminated.
Date
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2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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https://omeka.ibu.edu.ba/files/original/c0c0e02a13082395b44f606a971ea9d0.pdf
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PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Perceptions of Individual Internet Users about E-Finance Applications
Yusuf TOPAL
Assist. Prof. Dr., Afyon Kocatepe University-TURKEY
ytopal75@hotmail.com
Cantürk KAYAHAN
Assist. Prof. Dr., Afyon Kocatepe University-TURKEY
ckayahan@aku.edu.tr
Abstract: The Global Integration process, new regulations and the developments in the
technology of internet have changed the nature and the structure of the financial services on a
large scale. The fact that financial services have been carried out by using electronic
communication and calculation has originated new field called e-finance. As a result of this,
financial service suppliers have entered into a more active competition process in order to gain
new customers. Technology, globalization, regulations, entrepreneurship, capital and
competition have become the main components of the e-finance revolution. E-finance has
focused on three main access fields. These are the access of electronic payments, the activities
of the financial service activities and financial market activities. These services are used
intensely by two sectors as individual and institutional. Institutional users are the companies and
the other public and private sector firms. The individual users have also started to be important
as at least the institutional users due to the increase of the competition. Therefore, the
determination of the expectations, preferences, and advantageous components, which are the
factors that incline internet users to e-finance, is very important for the financial institutions In
conclusion, for the purpose of determining individuals’
perceptions about e-finance
transactions, a face to face public survey has been conducted with the internet users and the
results of this public survey have been tested in SPSS 11.5 programme in this study.
Keywords: Perception, e-finance, internet
Introduction
The world is changing and developing very fast .Especially, the rapid developments in the information
and the communication technologies have caused important structural changes in the financial system of many
countries. The concept of change caused transforming by differentiating people and societies with the effects it
has created . Technological change is continuously renewed in itself, but it has taken the entire world under its
effect thanks to the internet technology. Internet has a process that was established for military purposes at the
beginning and then that has taken the entire world under its effect. The developments in the technology of the
internet have also changed the dimension and the operational format of the financial transactions. Thus, the
prefix “e” which is very important in the e-world and which comes in front of each concept, has originated a new
fact which is called e-finance with the beginning of the financial transactions on the internet.
In this study, it has been aimed to find out the views and perceptions of individual internet users about
the e-finance applications In this context, internet, e-finance concepts and development processes have been
evaluated in the first part of the study; numerical determinations belonging to the e-finance outlook the World
and Turkey have been carried out in the second part of the study. In the last part of the study, a face to face
survey has been conducted with the people from different branches of business working in public sector in
Turkey and One-way analysis of variance (Anova) has been tested in the SPSS 11.5 statistical programme to
find out whether there is any difference in the perception of the e-finance transaction according to the individuals
and their occupations. In addition, individuals’ perception levels about e-finance applications have been shown
with the concentration maps.
1.
Internet and e-Finance
The worldwide and ever-growing global computer network is defined as internet (Akar and Kayahan,
2007:5). In this network, the communication among the computers is provided through high capacity telephone
wires by means of a common language called internet protocol (Transmission Control Protocol/Internet
Protocol) and there is no central authority that directs, manages and controls the communication in the internet
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
environment. In addition to this, the importance of the internet today has arised from the common and easy
access advantages stated below (Kınık, 2002: 2).
• Providing common and immediate communication ,
• Providing low-cost communication,
• Enabling interactive communication,
• Allowing electronic links to other information
• Not being able to control the communication from a certain central
• Providing a flexible communication environment
The history of the internet dates back to the access of the telegraph the patent of which was taken out
by Cooke and Wheatstone in 1836.Another important development is the origination of the “Transatlantic
Cable” which was laid from one side of the Atlantic Ocean to its other side between the years 1858-1866. The
1
origin of the internet has started with the activation of the ARPANET
by DoD (U.S. Department of
Defense).People started to communicate throughout a network in 1971. In this period, there were fifteen nodes
2
3
(15 node (23 host ) )in ARPANET.In 1973 the first international connection has occurred between University
College of London and Royal Radar Establishment. In 1990s the number of hosts have become 300.000. In 1993
the revolution of www started and the access of internet started financially and also among the banks.1999s are
the years in which the online banking transactions developed rapidly. Today, internet is the indispensable or the
meaning of the life, shortly it is everything of the life. E-finance has not actually originated with the invention of
the internet. In fact the first e-finance application dates back to the money transfer carried out to the far places by
Western Union Corporation. Western Union applied the first consumer spending card in 1914.By the year 2006,
this company achieved 147 million money transfer from consumer to consumer and 249 million money transfer
from consumer to enterprise (Shahrokhi, 2008: 367).
E-finance is defined as the provision of financial services by using electronic communication and
computations (Allen, McAndrews ve Strahan, 2001: 5).In another definition e-finance can be defined as scatter
of financial services by means of internet or online. E-finance operations mainly covers online intermediation
,insurance trade, banking and other financial activities (Shahrokhi, 2008: 366).In fact, e-finance applications are
subheading of electronic trade applications. E-trade is the access of digital data processing technology and
electronic communications to create ,to transform and to redefine relations in trade transactions in order to create
value between two or more enterprises and between the individuals and enterprises(Andam, 2003: 32).As it can
be seen in its definition, the concept and the applications of e-trade also covers the applications of e-finance.
The main factors that formed the e-finance revolution have been stated to be technology, globalization,
regulations, entrepreneurship, capital and competition by Shahrokhi (2008: 367). These factors are affected
intensively by the fund providers, users, regulators, investors and the other components in the markets. The
sector is divided into five categories in the e-finance model. These are:
1-Business to business (B2B),
2-Business to Consumer (B2C)
3-Consumer to consumer (C2C),
4-Technical infrastructure support for the e-Finance platform
5-Institutional and regulatory environment factor that facilitate growth of e-commerce and e-finance
According to the categories and the contents given above ,it is seen that B2B includes reduction of
application costs, unmediated or electronic intermediation, electronic transactions, integrated customer solutions
and electronic fund system.B2C includes financial intermediation or online applications by means of portals ,ebanking or online banking, personal finance or wealth management and insurance fields.C2C includes online
transactions and transactions cycle .In terms of technical infrastructure for the support of the e-finance platform,
the relation between the financial services provided by financial technology partners and technology and service
solutions has been shown in Table 1. As seen in the table, the developments in the –e-finance field have
increased the competition while decreasing the financial service costs (Claessens, Glaessner ve Klingebiel, 2001:
7). As a result of this, there has been a more intensive competition, transaction speed and quality increase among
the financial service suppliers.
1
Đnternet’in çıkış noktası, ABD Savunma Bakanlığı bünyesindeki “Đleri Araştırma Projeleri Ajansı” (ARPA – Advanced
Research Projects Agency) nın 1969 yılında kurduğu ARPANET ağıdır.
1
The starting point of the internet is the network ARPANET established in 1969 by Advanced Research Projects Agency
(ARPA) within the structure of USA Ministry of Defence
2
a connection point or a device that is connected as a component a computer network
3
The word meaning of “host” is to provide housing for. In fact its meaning in the world of internet is just this.
In other words , it means a company which hosts websites on the Internet .
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Table 1. The Realtoin Network fo Financial Technology Partners
Resource: Shahrokhi, 2008: 378.
Finally, all governments even most of the market managers need to regulate and control the financial
sector for the reasons of competition, anti-trust relations, consumer protection, safety and accuracymaintainability. They need to analyze the last changes in the financial services and whether the existent
applications are sufficient and they also need to analyze whether the traditional reasons are valid for regulation
and control and in which fields the importance of competition policy and consumer protection has increased
(Yörük, 2002. 11). Thus e-finance applications can be provided in more secure and more quality manner.
2.
The Outlook of E-finance in the World and in Turkey
Internet technology is certainly one of the primary components that are effective on the financial
system change. Therefore, when we look at the scatter of the world internet access in Figure 1,before looking at
the e-finance access rates, it is seen that Asia Region comes first with 41,2 %.Europe follows this region with
24,6 % and North America region comes after with 15,7 %.
Figure 1. World Internet Users by World Regions
Resource: www.internetworldstats.com/stats.htm (09.05.2009).
It is seen that Turkey ranks number thirteen in terms of the internet users’ number with 26.500.000
people by the year 2008 when we look at the world internet statistics given in the Table 2. Turkey comes after
Germany, England, France and Italy among the European countries. However, as this table has been prepared
according to the population, some of the European countries have not been included. While Turkey is in the front
ranks among the countries of which the number of users increasing between the period of 2000-2008, the leading
countries in terms of users’ number according to the population are Canada, Australia, Japan, America, South
Korea, Germany and Spain respectively. In addition, Pakistan, Iran, Turkey, India, Indonesia and China are the
most noticeable countries in terms of the number of users between the period of 2000-2008. Among the
countries and regions that are not seen in this table because of their population but that display the best
performance, Iceland ranks first with its population of 299 thousand and the access rate of 86.3 % . Sweden
which has 9.1 million population and 7 million active internet users is in the front ranks with the rate of 75,6 %
and New Zealand which has 4.2 million population and 3.2 million internet users is also in the front ranks with
the rate 74.9 %. In addition, it should be stated that the internet access rates of the countries like Portugal,
Holland, Denmark, Hong Kong and Luxembourg are also much above most of the other countries.
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Table 2. 20 Countries Using the Internet Most in the World
Country or Region
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
China
United States
Japan
India
Germany
Brazil
United Kingdom
France
Korea, South
Italy
Russia
Canada
Turkey
Spain
Indonesia
Mexico
Iran
Vietnam
Pakistan
Australia
Internet
Users
253,000,000
220,141,969
94,000,000
60,000,000
52,533,914
50,000,000
41,817,847
36,153,327
34,820,000
34,708,144
32,700,000
28,000,000
26,500,000
25,623,329
25,000,000
23,700,000
23,000,000
20,159,615
17,500,000
16,355,388
Penetration
(Population)
19.0 %
72.5 %
73.8 %
5.2 %
63.8 %
26.1 %
68.6 %
58.1 %
70.7 %
59.7 %
23.2 %
84.3 %
36.9 %
63.3 %
10.5 %
21.6 %
34.9 %
23.4 %
10.4 %
79.4 %
% of World
Users
17.3 %
15.0 %
6.4 %
4.1 %
3.6 %
3.4 %
2.9 %
2.5 %
2.4 %
2.4 %
2.2 %
1.9 %
1.8 %
1.8 %
1.7 %
1.6 %
1.6 %
1.4 %
1.2 %
1.1 %
Population
1,330,044,605
303,824,646
127,288,419
1,147,995,898
82,369,548
191,908,598
60,943,912
62,177,676
49,232,844
58,145,321
140,702,094
33,212,696
71,892,807
40,491,051
237,512,355
109,955,400
65,875,223
86,116,559
167,762,040
20,600,856
User Growth
(2000-2008)
1,024.4 %
130.9 %
99.7 %
1,100.0 %
118.9 %
900.0 %
171.5 %
325.3 %
82.9 %
162.9 %
954.8 %
120.5 %
1,225.0 %
375.6 %
1,150.0 %
773.8 %
9,100.0 %
9,979.8 %
12,969.5 %
147.8 %
Resource: http://www.internetworldstats.com/stats.htm (09.05.2009)
When an evaluation has been carried out according to the statistic of Banks Association of Turkey about the
access of internet for the field of e-finance, it is seen that the number of retail customers registered for internet
banking and “ logged in” at least once is 11.222.126 by December 2008. The total number of customers “logged
in” at least once in one-year period is 5.946.652.The number of customers using internet banking has been given
in the Table 3.As it is seen from the table, from 2006 to 2008 although it is a very short time like two years,
increases that reached the double in the number of users were seen .Therefore, it is expected that the rates will
increase in the following years. The statistics of internet banking belonging to the data of March 2009 published
by the Banks Association of Turkey support this expectation
Table 3. Number of Customers Using Internet Banking According to the Years
Number of retail customers
Active (A) (that logged in at least once in the last three-month
period)
Registered (B) (that logged in at least once)
Registered (C)(that logged in at least once in one-year period)
Active(A) / Registered(B) Customer rate(percent)
Number of Instuitional Customer
Active (A) (that logged in at least once in the last three-month
period)
Registered (B) (that logged in at least once)
Registered (C)(that logged in at least once in one-year period)
Active(A) / Registered(B) Customer rate(percent)
Number of Total Customer
Active (A) (that logged in at least once in the last three-month
period)
Registered (B) (that logged in at least once)
Registered (C)(that logged in at least once in one-year period)
Active(A) / Registered(B) Customer rate(percent)
December
2006
December
2007
December
2008
March
2009
2.605.673
3.795.627
4.613.670
4.838.000
15.510.826
17
8.908.956
4.920.907
43
11.222.126 11.793.000
5.946.652 6.344.000
41
41
380.390
478.737
555.459
581.000
812.314
1.131.302
588.211
1.358.545
687.737
1.459.000
710.000
47
42
41
40
2.986.063
4.274.364
5.169.129
5.419.000
16.323.140
10.040.258
5.509.118
43
12.580.671 13.252.000
6.634.389 7.054.000
41
41
18
Resource: BAT (TBB).
According to the data of Banks Association of Turkey, the total number of financial transactions excluding the
investment transactions carried out by using the internet banking is 57.942 thousand and the amount is 136.680
million TRY in the period of October-December 2008. The money transfer transactions covering EFT(electronic
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fond transfer),money order and foreign exchange transfer comprise 84 % of the financial transaction volume
excluding the investment transactions.
Items
Table 4 . The Outlook of Turkey’s Financial Transactions in Internet Banking
December 2007
September 2008
December 2008
Number of Volume of
Number
of Volume
of Number of Volume
of
transactions transactions
transactions
transactions
transactions transactions
(Thousand) (Million TRY) (Thousand)
(Million TRY)
(Thousand) (Million TRY)
Money transfers
Payments
Credit card transactions
Other financial
transactions
Total
Resource: BAT
29.335
15.393
5.352
1.131
112.693
3.400
3.486
7.851
31.114
18.828
6.143
1.619
127.408
4.720
4.421
14.406
29.718
20.578
6.050
1.596
115.218
4.626
4.165
12.671
51.211
127.431
57.705
150.954
57.942
136.680
The total number of financial transactions performed by using the internet banking excluding the
investment transactions increased by 6.731 compared to the same period of the year before and increased by 237
compared to the previous three-month period. While the total volume of transactions was increasing by 9.249
million TRY, it decreased by 14.274 million TRY compared to the previous three-month period.
3.
The Perceptions of Individual Internet Users About E-Finance Application
3.1. The Aim and Content Of The Research
In this study, it has been aimed to to determine the choices, expectations and perceptions of individual
internet users’ who work in different duties and positions in public. The questionnaire was performed face to
face on the public employees within the content of the study in Afyonkarahisar City. The first part of the
questionnaire consists of the questions about the individual information of employees. Additionally, there are
also some questions about work position and e-finance applications in public. In the last part, it is required from
the employees to evaluate the e-finance applications with five point likert type questions.. In the evaluation of
the results, aggregation and one-way variance analysis were performed by using SPSS 11.5 statistical
programme.
3.2. The Findings and The Comments Of The Research
It has been determined that Cronbach alpha reliability study supplies 0.8261 data reliability before
mentioning the evaluations on research data. The results obtained from the formed frequency tables are
summarized as follow:
According to data, it has been determined that 57.7 % of those who filled the questionnaire is female
and 42.3 % of them is male. It is seen that great majority of subjects are in the young and middle age group.
According to data 38 % of them is in 25-35 age group, 32 % of them is in 35-45 age group and 15 % is in 45 and
over 45 age group. The summarized results about the occupational and the educational states of those who filled
the questionnaire are given in Table 5. It is understood that those who filled the questionnaire are predominantly
civil servant and they have bachelor degree. These results show that this study aims at more conscious and
educated audiences as it is proper for the aim of the study. On the other hand, it predominantly is determined that
those who choose the other part in occupational choice are the academics.
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Table 5. Occupation and Education Status of the Participants
Occupation
Frequency
Percent ( % )
worker
18
8,0
Civil servant
127
56,4
Director
37
16,4
Top Director
3
1,3
Retired
3
1,3
Other
37
16,4
Total
225
100,0
Education Status
Frequency
Percent ( % )
Primary school
2
,9
Secondary School
30
13,3
Associate Degree
36
16,0
Licence
99
44,0
Master Degree
58
25,8
Total
225
100,0
Findings about personal internet access and its aims have been shown in Table 6. Accordingly, 99 % of
the participants have stated that they connect to the internet. Furthermore, it has been found out that a large
proportion as 70% of them connect to the internet everyday and above 90 % of them connect to the internet once
a week. In terms of the internet access aim, it is concluded that large majority of them as 51,6 % use internet for
the purpose of receiving news. The access of internet for the purpose of receiving news was also in the first rank
with a large proportion as 76 % in the internet access study carried out by Turkish Statistical Institute(TSI)
throughout Turkey. Therefore, it is understood that the result of this study is in harmony with the results
throughout Turkey. The access of internet for the purpose of research has become in the second rank. The fact
that there have been academician based participants in the study can be concluded to be one of the reasons of this
choice to be effective. When we look at the other aims of the access, it is concluded that financial purposes like
banking transactions bill payments comes after respectively. This result is an important indicator of that efinance access frequency is supported by public based individual users.
Table 6. The Frequency and Purposes of Internet .
Access of Internet
Frequency
Yes
223
No
2
Total
225
Frequency ıf Internet Access
Frequency
Everyday
159
Every three days
28
Once a week
20
Forthnightly
8
Once a month
9
Total
224
The Purpose of the Internet
Frequency
Access
News
116
Game
4
Bill Payment
4
Bankacılık işlemleri
17
Messenger
7
Research
59
Exchange and fund pursuit
1
Others
17
Total
225
Percent ( % )
99,1
,9
100,0
Percent ( % )
70,7
12,4
8,9
3,6
3,6
99,1
Percent ( % )
51,6
1,8
4,8
10,6
3,1
20,2
,4
7,6
100,0
The questions in the 5 point likert scale have been prepared to determine the assessments of the
participants in the survey study about e-finance applications clearly, and they have been ranged from “1 most
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important” to “5 have no importance” and between minimum 1 and maximum 5 values. The meaning of these
values are: “2” important , “3” no difference “4” less important. The values on which that participants
concentrated and the average and standard deviation values are shown in Table 7.According to this, it is
concluded that the concreation among the participants is in the zones numbered 2 and 1 in terms of the necessity
of internet for its contribution to financial transactions, payments, banking transactions and shopping while the
concentration is in the zones numbered 1 and 2 respectively in terms of the use of time. Consequently, it has
been determined that the necessity of internet in terms of financial transactions is perceived to be important by
individual users on the concentration map prepared for perception level of e-finance transactions.
Table 7. The Concentration Map for the Perception Level of E-finance Transaction
Propositions
The necessity of internet for financial
transactions today
The necessity of internet for payments
The necessity and contribution of internet
for banking transactions
The necessity and contribution of internet
for shopping
The necessity and contribution of internet
for the use of time
N
Average
S.Deviation
1
2
3
4
5
225
1,7911
0,86907
74
115
19
11
6
225
2,1467
1,09821
60
116
22
10
17
225
2,0933
1,09185
70
105
22
15
13
225
2,2756
1,14353
54
109
24
22
16
225
1,7644
0,93187
105
87
20
7
6
One-way variance analysis has been carried out in Table 8 for the purpose of determining whether there
is a meaningful difference among the individual internet users according to different occupations. Accordingly, it
has been found out that there is 0,05 difference in the significance level among the individual internet users in
terms of the first and third questions , but there is no significant difference in terms of the other three questions.
Table 8. The Results of One-Way Analysis of Variance
(Differences in Perceptions of E-finance according to Individual Participants’ Occupations )
Sum of Squares df
Mean Square F
ANOVA
The necessity of the internet
for financial transactions
2 The necessity of the internet
for payments
3. The necessity of the internet
for banking transactions
4. The necessity of the internet
in terms of its contribution to
shopping
5. The necessity of the internet
in terms of the access of time
Between Groups
7,119
5
1,424
Within Groups
162,063
219
,740
Total
169,182
224
Between Groups
8,387
5
1,677
Within Groups
261,773
219
1,195
Total
270,160
224
Between Groups
19,354
5
3,871
Within Groups
247,686
219
1,131
Total
267,040
224
Between Groups
12,134
5
2,427
Within Groups
280,781
219
1,282
Total
Between Groups
292,916
224
4,665
5
,933
,867
Within Groups
189,850
219
Total
194,516
224
Sig.
2,124
,011
1,403
,224
3,422
,005
1,893
,097
1,076
,374
General Evaluation and the Result
The study carried out forms an important substructure in terms of perceptions and awareness of the
individuals in different occupations about e-finance applications. In addition, the differences among the
perceptions of e-finance in terms of occupations can also be determined. Accordingly, the effectiveness of better
banking, insurance or other online financial transactions and the closeness of them to consumers can show
disparity. Today the more effective working of banking transactions depends on electronic substructure to be
formed. In contemporary banking, e-finance applications and its transformation will multiply the efficiency; will
lead to decrease in the general management expenses; will increase the financial security; will make the financial
management activities more efficient; will become a bridge between rural and urban areas by facilitating the
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communication; will form new and different job opportunities; will raise the ability of money access by
increasing savings and therefore will provide the increase of general economic performance. Electronic
operations and internet access in Turkey and in the world have been evaluated in the study. Especially in recent
years crucial discrepancies have been seen in Turkey in the access of internet. This state has also affected the efinance operation in the same way. It is seen that e-finance operations are largely perceived by the individuals
and there have been individual awareness in terms of e-finance applications on the concentration map which is
formed for the purpose of determining perception levels in the study. Therefore, it is expected that these
applications will continue by increasing in progressive times. In addition, financial institutions, which perform efinance transactions, will be able to decide how they can approach to their costumers and how they can fulfill
their costumers’ choices and expectations by looking at this studies. In the study, one-way variance analysis is
carried out in order to determine whether there is difference between the individual occupations and the
perception of e-finance applications. In this analysis, it has been determined that there are differences at the
significance level of 00.5, between the necessity of internet in terms of financial operations and the necessity of
internet in terms of banking operations. It is thought that this difference results from individual internet users’
occupational variety. In conclusion, performing the financial transactions by means of internet technology,
which is accepted as e-finance revolution, will be one of the most important market developments in the future
as it is today. Besides these developments, providing consumers’ allegiance depends on the formation of
financial info and technological substructure in the direction of consumers’ needs and expectations. The success
is very close for the financial institutions that can achieve this process.
References
Akar E. & Kayahan C., (2007), Elektronik Ticaret ve Elektronik Đş: uygulamalar, Modeller ve Stratejiler, Nobel Yayınevi,
Ankara.
Allen, F., McAndrews, J. & Stratran, P. (2002), ‘‘E-finance: an introduction’’, Journal of Financial Services Research, Vol.
22 Nos. 1-2, pp. 5-27.
Andam Zorayda Ruth, (2003), E-Commerce and E-Business, May, e-ASEAN Task Force UNDP-APDIP,
www.apdip.net/publications/iespprimers/eprimer-ecom.pdf (06.03.2007)
Claessens S., Glaessner T. & Klingebiel D., (2001), E-Finance in Emerging markets: Is Leapfrogging Possible ?, Financial
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Kınık T., (2002), Elektronik Finansın Gelişimi Karşısında Aracı Kuruluşlar, SPK Yeterlilik Etüdü, Ankara.
Shahrokhi M., (2008), E-finance: status, innovations, resources and future challenges, www.emeraldinsight.com/03074358.htm(09.05.20099.
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http://www.bilgiyonetimi.org/cm/pages/mkl_gos.php?nt=230(08.06.2005).
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Title
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The Perceptions of Individual Internet Users about E-Finance Applications
Author
Author
TOPAL, Yusuf
KAYAHAN, Cantürk
Abstract
A summary of the resource.
The Global Integration process, new regulations and the developments in the technology of internet have changed the nature and the structure of the financial services on a large scale. The fact that financial services have been carried out by using electronic communication and calculation has originated new field called e-finance. As a result of this, financial service suppliers have entered into a more active competition process in order to gain new customers. Technology, globalization, regulations, entrepreneurship, capital and competition have become the main components of the e-finance revolution. E-finance has focused on three main access fields. These are the access of electronic payments, the activities of the financial service activities and financial market activities. These services are used intensely by two sectors as individual and institutional. Institutional users are the companies and the other public and private sector firms. The individual users have also started to be important as at least the institutional users due to the increase of the competition. Therefore, the determination of the expectations, preferences, and advantageous components, which are the factors that incline internet users to e-finance, is very important for the financial institutions In conclusion, for the purpose of determining individuals’ perceptions about e-finance transactions, a face to face public survey has been conducted with the internet users and the results of this public survey have been tested in SPSS 11.5 programme in this study.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory