The Fund, Financial Crisis and Repression in Turkey

Turkey is a key case in our quasi-experimental longitudinal case-study analysis for testing our main causal claims, both hypotheses and the corollaries associated with these hypotheses. Turkey offers us the “treatment” of the introduction of an IMF program that contains financial sector (including shadow bank) reform conditions in a country where the market concentration of domestic private shadow banks is high. We examine the case of Turkey in this chapter by analyzing the political economy of the country’s financial sector during (i) the 1990s (prior to the country’s participation in the IMF's 2000–01 Stand-by-Arrangement (SBA) Program), (ii) the years in which it is observed under the IMF’s SBA program, and (iii) in the immediate aftermath of the financial crisis that occurred in the context of this SBA program. The chapter begins by providing the relevant political and economic background on Turkey. We first discuss the characteristics and preferences of shadow banks (including their market concentration) and other financial actors in Turkey. The chapter then presents analytical narratives based on qualitative historical evidence, open-ended interviews of the central actors and data on foreign portfolio investment flows and exchange rate movements to assess the causal claims linked to Hypotheses 1 and 2.