Long term impact of financial system on import demand for turkey

In this study, we aim to analyze whether a shock in a component of the financial system affect import demand on the long run. In this regard, we include components of financial system into the import demand function and employ long run SVAR method. We analyze the eight period from the beginning of “Transition Program for Strengthening the Turkish Economy”. We conclude that import demand responses affect positively a national cash flow shock. Relative prices shock affects import demand positively, as expected. There is a number of variables belonging to a financial system which induces import demand. According to results, the financial system influences the import demand and policymakers have to take into account the interaction between import demand and financial system in the policy-making process.