System Dynamics Modelling for Policy Design: A Case Study in Turkey

System Dynamics Modelling for Policy Design: A Case Study in Turkey

Arzu Eren Şenaras (Uludag University, Turkey) and Hayrettin Kemal Sezen (Altınbaş University, Turkey)
DOI: 10.4018/978-1-5225-9607-3.ch013

Abstract

The system dynamics model was developed in the Vensim software. The model was developed based on the Yamaguchi study. The construct and behavioral validity of the model were addressed. Construct validity means that the correlations that construct the model, that is, the “rationale” of the model, are consistent with the correlations in the real system. There were five sub-models in the model. These were manufacturers and consumers sub-model, banks sub-model, central bank sub-model, balance of payments sub-model, exchange rate market sub-model. Five sub models included in the model developed with the VENSIM software are included in the appendices.
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A Brief Literature Review

In this section, the studies conducted with system dynamic approach in the fields of economics and finance are briefly discussed.

Kameyama et al. (1997) utilized system dynamics approach to construct a national model in their study. As a result, the entire economy could be scrutinized. Although the system dynamics is one of the most useful tools available to investigate socioeconomic phenomena, it was rarely used by the policy makers. The aim of the constructed SD model was to close this gap.

Kameyama et al. (1999) investigated how the decisions made by the government and local governments affected the economy using the national accounting model they designed in their study.

Kameyama et al. (2001) reported that economic growth is closely associated with the growth of small businesses and all competitive large corporation of today once was a smaş-ll business and small businesses play a significant role in the reduction of unemployment. Thus, small businesses are important for macroeconomics. To examine the effectiveness of the support and incentives provided for small businesses, Kameyama et al. developed the SD model. Thus, they explored the long-term effects of policies, demonstrating the possibility of producing different solutions.

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