FINANCIAL INNOVATIONS IN DEVELOPING COUNTRIES: THE CASE OF TURKEY

ARMAĞAN ÖNDER HERGÜNER HERGÜNER
THE GRADUATE SCHOOL OF SOCIAL SCIENCES, MIDDLE EAST TECHNICAL UNIVERSITY
November, 2017
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Abstract

Financial innovation is an important phenomenon in the development scheme of financial
markets, gaining more ground after the 1980s. The primary aim of this thesis is to investigate two cases of financial
innovation in Turkey: Credit card installments and gold accounts.
Financial innovation literature lacks an examination of financial innovations in developing countries and does not present any alternative explanations behind their emergence.
Differences between institutional structures and the effect of financial liberalization and
integration create alternative scenarios for the emergence of financial innovations. Although
the development level and the transaction volumes are still significantly lower esp
ecially for
the securitized financial products in developing countries as suggested by market depth,
alternative products can have significant impacts on the economy. Therefore, the case study
in this thesis fills a gap in the literature by focusing on two
financial innovations in Turkey,
an emerging market, which have unique features endogenous to domestic economy and have
been used mostly by households. Institutional and cultural factors affect the emergence and
development of the markets for both financi
al innovations, and have altering effects for
macroeconomic indicators.