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There are some tax security measures in the Corporate Tax Law practice in Turkey. One of these tax security institutions, "Thin Capitalization", is regulated in Article 12 of the Corporate Tax Law No. 5520. The aforementioned regulation is based on the principle that the debts borrowed by the institutions from their partners or persons related to the partners, exceeding three times the equity capital of the institution at any time during the accounting period, is not considered as a borrowing, but as a capital that has been put into the institution in disguise. According to this practice, it is not possible to consider the part of the negative exchange rate differences that arise due to the increases in foreign exchange rates, which corresponds to the thin capitalization, as an expense in the determination of corporate earnings, regarding the interests corresponding to the said borrowings, which are accepted as capital, and foreign currency borrowings. In parallel with this, the part of the positive exchange rate differences that arise as a result of the decrease in exchange rates, which corresponds to the thin capitalization, should not be taken into account as foreign exchange profit in determining the corporate income. The purpose of this study is to evaluate the foreign exchange borrowings and exchange differences obtained from partners or related parties in order to meet the financing needs of institutions within the thin capitalization. [ABSTRACT FROM AUTHOR]

The main objective of the study is to determine financial relations between principal macro-economic indicators in Turkey empirically. In this respect, it is necessary to examine whether there is a pass-through effect of inflation and interest rate on the exchange rate and to examine the relation between inflation and interest rate. The period between April 2018 and January 2003 is used in the analysis, data on average monthly exchange rate, inflation and interest rates. In the study, cointegration analysis was done with ARDL bound test approach and then was done also causality analysis with Toda-Yamamoto test. According to the findings obtained from the study it has been found to be unidirectional causality from exchange rate to inflation and interest rates. According to the results, the effect of the exchange rate on the interest rate and inflation is valid. On the other hand according to the findings it has been identified cointegration relationship between interest rates and inflation in Turkey and concludes that the verification of the Fisher hypothesis has been reached. [ABSTRACT FROM AUTHOR]

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The aim of study is to observe the effect of variables included in the equation of Taylor Rule, which is also known as central bank reaction function on interest rate movements. While central banks do settings on interest rates, they will either raise or reduce or leave interest rates stable. This condition, which we can name as interest rates movements, was considered as the raise, reduction or stabilization of interest rates compared to previous period. In our study, estimations were done with multinominal probit models in order to observe the effects of inflation gap and output gap on the possibility of these movements of interest rates. Moreover, currency gap was included among the variables in the rule as well in order to observe whether it is important in the explanation of interest rate movements whose necessity is still being discussed. Findings show that inflation gap is more important than output gap on the possibility of raise or reduction of interest rates in Turkey and that inclusion of currency in the model is effective, however when it does not give adequate explanatory information in the sense of rule when it is compared with other variables. [ABSTRACT FROM AUTHOR]

In this article the relationship between FDI inflow to Turkey and Turkey’s export performance is analyzed. The lack of studies in Turkey about this issue constitutes the main motivation behind this study. The effect of FDI on exports was analyzed through the Granger Causality Test (GCT) (for the period of 1992:1-2009:7) and the VAR Analyses. As a result of the GCT, a unidirectional causality from FDI to exports was found. According to the results of export variance decomposition, it is observed that exports are under the influence of exports' own lagged values. FDI plays 6 percent role in export changes. This finding corresponds to the finding that FDI causes exports. 74 percent of FDI changes arises from FDI, 10 percent from Interest Rates, and 8 percent from Exchange Rate. While Openness Ratio's explanatory level for FDI is 2 percent, other variables are not significant in explaining FDI changes. According to these results, interest rates in the country, exchange rates, and openness ratio are main incentives behind FDI. [ABSTRACT FROM AUTHOR]

Implementation of balanced budget policy has been abandoned in the post-1980 in Turkey. With budget deficits, government’s funding need and debt burden have risen. The process of financial liberalization (1989) supported to government’s fulfillment of funding need. Government’s rising funding need led to fiscal dominance in the economy. Fiscal dominance affects exchange rate and interest rates, and then changes in the exchange rate and interest rate reflects to banking sector. The previous studies indicted that fiscal dominance affects monetary policy via exchange rate and interest rate. This is the first time that in this study the impacts of fiscal dominance are investigated in Turkey. Reel exchange rate and reel interest rate with a different method are used to be endogenous variables in this interaction. It is founded that fiscal dominance via channel of exchange rate and interest rate affects security investments, deposits, loans, and profits of the banking sector. [ABSTRACT FROM AUTHOR]