A GENERAL EQUILIBRIUM INVESTIGATION OF THE OPTIMALITY OF TURKISH STRUCTURAL ADJUSTMENT, 1979 - 1983

The paper attempts to assess the optimality of the Turkish\nstructural adjustment programme in response to the 1979/80 external\nshocks. Using a computable general equilibrium model for\nTurkey as a planning device, techniques of optimal stochastic control\nare employed to investigate for the feasibility of a superior set\nof policy instruments which would have minimized the deviations of\nthe shocked economy from its targeted path. The model results in\ngeneral do not support many of the unidirectional prescriptions of\nthe orthodox stabilization packages: and indicate that Turkey could\nhave achieved a better adjustment performance by following a\ndynamic adjustment policy which is first targeted to the stabilization\nof the external trade and then switched around to the stabilization\nof the growth related variables.