Financial Deepening, Trade Openness and Economic Growth Relations: The Case of Türkiye

Abstract

This study examines the impact of financial depth and trade openness on economic growth in Türkiye over the period 1980–2018 through econometric analysis. Building upon Solow’s growth model, the analytical framework integrates financial deepening and trade openness as key explanatory variables. Annual data from the World Bank's World Development Indicators (WDI) are employed in the analysis. Prior to the long-run analysis, unit root and diagnostic tests are conducted to ensure the validity of model assumptions. In this direction, the Johansen cointegration test is applied to investigate long-run relationships among the variables. The empirical findings suggest that both financial depth and trade openness exert a positive and statistically significant influence on economic growth. These results imply that the development of the financial sector and the expansion of international trade have a supportive role in fostering economic growth. Therefore, increasing the diversity of financial instruments and improving trade efficiency are essential for achieving sustainable growth in Türkiye.