(PDF) The Impact of Individuals' Attitudes Towards Social Media and Frequency of Use During the COVID-19 Pandemic Outbreak of e-Health Literacy and COVID-19 Preventive Health Behavior

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BIDGE Publications

International Economic, Financial, Social and Humanities Research

Editor: Doç. Dr. İclal ÜNÜVAR

ISBN: 978-625-6707-54-2

Page Layout: Gözde YÜCEL

1st Edition:

Publication Date: 25.12.2023

BIDGE Publications,

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PREFACE

Economic crises and social events, epidemics, political

factors, natural disasters, digital age, communication, leaders,

people's abilities affect social and economic events. In the

globalizing world, despite technological developments and the

parallel developing information age, it is very difficult to access

systematic scientific information. The aim of this study is to examine

the economic, financial and social events experienced in the world

and in Turkey and evaluate their effects and consequences. Since

social sciences generally examine social events and the effects of

human factors, it is quite difficult to reach clear results with

controlled observations compared to science. Politicians, scientists,

experts and sector managers are trying to find effective, efficient and

sustainable solutions to social and economic events. The aim of this

study, which is carried out in the field of finance, social and

humanities, is to examine financial, economic and social events and

to investigate what can be done for developments in the field of

social sciences.

This valuable publication titled 'International Economic

Finance Social, and Humanities Research' consists of studies in

many different fields, including improvements and developments in

the field of social sciences, and international qualitative and

quantitative research. I would like to express my gratitude to my

esteemed professors from different fields and universities for their

efforts and contributions in the preparation of this study.

I would like to thank my esteemed professors from different

universities who contributed to the field in the emergence of this

study for their efforts. To our esteemed professors who served as

referees by reviewing the publications and sharing their values,

opinions and contributions with us, to the "BİDGE Publishing House

Employees" who facilitated our work by building a bridge between

us and our teachers and did not spare their help, and to my mother,

father, siblings and my beloved mother, father, brothers and sisters

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who always stood by me and supported me, who made life more

meaningful for me. I also owe a debt of gratitude to my son Abidin

Tuna Çöğürcü

I hope that the study will be useful to my esteemed professors

and dear students and make significant contributions to the field of

social sciences.

Editör

Doç. Dr. İclal ÜNÜVAR

 
Contents 
 
PREFACE ........................................................................................ 3 
Contents .......................................................................................... 5 
The Comparison of Islamic and Conventional Banking In the 
Context of Behavioral Finance ........................................................ 7 
İbrahim Halil SUGÖZÜ ............................................................... 7 
Sema YAŞAR............................................................................... 7 
Can VERBERİ ............................................................................. 7 
Empirical Analysis of House Price Shocks: Nonlinear Unit Root 
Tests in Türkiye's NUTS 2 Regions ............................................... 20 
Mehmet ÖZCAN ........................................................................ 20

 
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From Bretton Woods To The New Global Financial System ........ 34 
Haluk YERGİN .......................................................................... 34 
Nida GÜNSAN........................................................................... 34 
The Impact Of Individuals' Attitudes Towards Social Media and 
Frequency of Use During the COVID-19 Pandemic Outbreak of e-
Health Literacy and COVID-19 Preventive Health Behavior........ 56 
Zeynep Öztürk YAPRAK .......................................................... 56 
İsmail YAPRAK......................................................................... 56 
Eyyup ECEVİT .......................................................................... 56 
The Relationship between Biological Capacity, Economic Growth, 
Carbon Dioxide Emissions and Urbanization: Panel Causality 
Findings from the BRIICS Countries............................................. 87 
Mehmet AKYOL ........................................................................ 87 
Burak SEYHAN ......................................................................... 87 
Evaluation of Monetary Policy and Monetary Policy Shocks in 
Terms of Economic Doctrines ..................................................... 108 
Sabiha OLTULULAR .............................................................. 108 
Analysis of Individual Factors Affecting Unemployment Duration: 
The Case of Adana Province in Turkey ....................................... 178 
Halil Ibrahim KESKIN ............................................................. 178 
Working Life and Career: An Evaluation on Tourism Sector ..... 211 
Özgür GÜLDÜ ......................................................................... 211 
Contemporary Strategic Cost Management Revisited: Are they still 
Contemporary in the Digital Era? ................................................ 233 
Ipek TÜRKER .......................................................................... 233 

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CHAPTER I

The Comparison of Islamic and Conventional

Banking In the Context of Behavioral Finance

İbrahim Halil SUGÖZÜ

1

Sema YAŞAR

2

Can VERBERİ

3

Introduction

Conventional banks, which emerged during the Middle Ages

when the concept of interest and usury began to institutionalize in its

modern sense, have experienced their most illustrious period with

the acceptance of the fractional reserve system. They have become

an inevitable part of production and consumption in almost all

1

Professor, Kyrgyz-Turkish Manas University, Economics,

ihsugozu@manas.edu.kg, Orcid: 0000-0002-1861-3118

2

Assoc. Prof., Sirnak University, Economics, semayasar@sirnak.edu.tr, Orcid:

0000-0002-7056-9265

3

Res. Assist., Sirnak University, Economics, canverberi@sirnak.edu.tr, Orcid:

0000-0003-4876-8564

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countries around the world. Due to the relaxation and near abolition

of the prohibition of interest in two of the three Abrahamic religions,

conventional banks are particularly considered legitimate in

Christian Western countries. Traditional banking is based on

interest-bearing transactions and acts as an intermediary, facilitating

loans and offering interest-bearing accounts to depositors. However,

the majority of Islamic countries have conventional banking

practices in place. Moreover, in the Islamic world, the absence of

any flexibility in the prohibition of interest, as seen in the West, and

the strict maintenance of the ban as it was initially, has led the devout

Muslim community to refrain from investing their savings in

conventional banks or taking loans from them. Consequently, they

have faced economic hardships and serious grievances. Indeed,

whether in countries with a predominantly Muslim population or

those with a Muslim presence, the idea of integrating this

community’s savings into the economy and finding solutions to their

credit needs has facilitated the emergence of Islamic banking.

The banking landscape is marked by the coexistence of two

predominant banking systems: conventional banking and Islamic

banking. Conventional banking, the more widespread of the two, is

characterized by its reliance on interest-based transactions. Banks in

this system act as intermediaries, facilitating loans for borrowers and

offering interest-bearing accounts to depositors. This model is

deeply ingrained in the global financial markets and plays a pivotal

role in economic development (Beck, Demirgüç-Kunt, &

Merrouche, 2013: 433). In the global context, Islamic banking,

known as participation banking in Turkey, which is an interest-free

banking system, is referred to as Islamic participation banking in our

study. Despite having the same underlying monetary system and

using similar methods to conventional banks, the banking system

that conducts financial transactions with instruments perceived to be

devoid of interest-based returns is called Islamic participation

banking. Islamic banking, on the other hand, presents an alternative

that aligns with the ethical and moral principles of Islam. Prohibiting

the use of interest, Islamic banks instead engage in profit-and-loss

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sharing arrangements, asset-backed financing, and trade financing

methods like Murabaha and Ijara. The rationality behind financial

decisions in these two systems is a subject of considerable interest.

In conventional banking, rationality often equates to maximizing

financial returns, with decisions driven by market conditions and

interest rates. Islamic finance (banking), while also seeking

profitability, incorporates additional layers of rationality that

consider social welfare, ethical financing, and adherence to religious

tenets (Chapra, 2008: 32).

Earning in the context of these banking systems is not merely

about the financial bottom line. It encompasses the broader socio-

economic impact of banking practices. Conventional banks measure

success in terms of profitability and shareholder value. Islamic

banks, while also concerned with financial viability, prioritize the

equitable distribution of wealth and community development

(Siddiqi, 2006: 2, 23). The importance of comparing these two

systems extends beyond academic curiosity. It has practical

implications for investors, consumers, and policymakers.

Understanding the differences in rationality and earning can inform

choices about where to bank, how to invest, and which policies might

promote a more equitable and sustainable financial system.

After its inception, Islamic banking quickly spread

worldwide and began to develop institutionally. Even in Christian

Western countries, significant importance has been given to this

banking system to attract Muslim savings, and it has been supported.

However, Islamic banking’s limited range of tools compared to

conventional banking and its restricted scope of investment have led

to disadvantaged situations. Sometimes, due to their beliefs, they

have customers who will never turn to their conventional banking

competitors, making them subjects of monopolistic competition.

This has resulted in them offering lower profit shares to depositors

and providing financing at higher profit rates. This situation is

clearly observed in the comparative analysis of banking data in

Turkey.

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The purpose of this research paper is to undertake a thorough

comparison of islamic and conventional banking in Türkiye with

respect to their approaches to rationality and earning. This paper will

dissect the philosophical underpinnings, operational strategies, and

financial outcomes associated with each system. Through this

analysis, we aim to illuminate the strengths and weaknesses of each

model and offer insights that could shape the future of ethical

banking.

Method

This study employs a methodological approach to compare

the profit ratios of Islamic banks and the interest rates on deposits of

conventional banksbetween the years 2012-2022. It interprets

individuals’ perceptions of rationality in this context.

III. Rationality in Conventional and Islamic Banking

Rationality has long been a fundamental concept in economic

theory, particularly in the context of individual benefit

maximization. Classical economic theories, rooted in the

neoclassical doctrine, posit that individuals act as rational agents

who strive to maximize their expected subjective utility. This

behavior is encapsulated in the mainstream theory of rational choice,

which suggests that individuals make decisions based on a rational

strategy of utility maximization (Horodecka, & Vozna, 2020: 139).

The concept of rationality in economics is often associated

with optimization and efficiency. Economic rationality implies that

individuals make choices that align with their personal interests,

aiming to achieve the highest level of satisfaction or benefit from

their actions. This notion is central to the resourceful, evaluative,

maximizing model (REMM), which contrasts with the economic

model of human behavior that focuses solely on monetary gains

(Wartiovaara, 2011: 641).

Rationality within the realm of conventional banking is often

encapsulated by the pursuit of profit maximization. This core

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objective drives banks to make decisions that align with their

financial interests, ensuring the maximization of shareholder wealth.

The definition of rationality in this context is closely tied to the

bank’s ability to navigate the complexities of financial markets,

regulatory demands, and the competitive landscape to achieve

optimal financial outcomes (Beck, Demirgüç-Kunt, & Merrouche,

2013: 435, 436).

The profit maximization focus in conventional banking is not

merely about short-term gains but also encompasses long-term

sustainability and growth. Banks employ a variety of strategies to

enhance their profitability, such as optimizing their capital structure,

diversifying their income streams, and investing in technology to

improve operational efficiency. These strategies are designed to

increase the bank’s return on equity, a key metric for assessing a

bank’s financial performance and rational decision-making (Bitar,

Hassan, Pukthuanthong, & Walker, 2018: 228, 233). An in-depth

examination of risk management strategies reveals that conventional

banks deploy a comprehensive set of tools and techniques to manage

and mitigate risks. These include credit risk modeling, market risk

hedging, operational risk controls, and liquidity management. By

employing these strategies, banks aim to protect their capital base,

maintain financial stability, and ensure compliance with regulatory

standards.

The concept of rationality in Islamic banking is deeply rooted

in the principles of Shariah law, which emphasizes ethical financial

practices and social justice. Unlike conventional banking, where

rationality is often equated with profit maximization, Islamic

banking considers rationality as a broader concept that includes

ethical considerations, social welfare, and adherence to Islamic

teachings. This unique approach to rationality ensures that financial

transactions contribute positively to society and do not involve

exploitative practices (Kustin, 2017: 4). Profit sharing and risk

sharing are central to the operational framework of Islamic banking.

These principles encourage a collaborative approach to finance,

where both the bank and its clients share the profits and losses of

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investments. This system promotes transparency and mutual trust, as

all parties have a vested interest in the success of the financial

venture. Moreover, it aligns the bank’s objectives with those of its

clients and the wider community, fostering a sense of collective

responsibility and ethical investment (Adewale & Archer, 2019: 1).

An analysis of ethical considerations and social responsibility in

Islamic banking reveals a commitment to values that extend beyond

financial transactions. Islamic banks are expected to engage in

socially responsible investments, avoid businesses that are harmful

to society or the environment, and support charitable activities. This

ethical framework ensures that Islamic banks contribute to the

overall well-being of the community and uphold the principles of

fairness, justice, and compassion that are central to Islam (El Melki

& Ben Salah Saidi, 2023: 81).

IV. Earning in Conventional and Islamic Banking

Earning methods in conventional banking are predominantly

centered around the interest income generated from a variety of

financial products and services. This interest income forms the

backbone of a conventional bank’s revenue stream. Banks charge

interest on loans, mortgages, and other credit facilities they provide

to customers, and this interest is typically set at a higher rate than the

interest paid out on customer deposits. The differential between

these rates, known as the net interest margin, is a key profitability

measure for banks (Beck, Demirgüç-Kunt, & Merrouche, 2013:

436). An examination of interest-based financial products and

services shows that conventional banks offer a diverse portfolio,

including but not limited to personal loans, mortgages, credit cards,

and business financing solutions. These products are designed to

meet the credit needs of individuals and businesses while ensuring a

consistent return for the bank through interest payments.

Earning methods in Islamic banking are founded on the

principles of Shariah law, which prohibits the payment or receipt of

interest (Riba). Instead, Islamic banks earn through Shariah-

compliant methods such as trade-based financing, leasing, and

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partnership contracts. These methods align with the ethical standards

of Islamic finance and involve the sharing of profits and risks

between the bank and its clients (Hanif, 2011: 169). The profit and

loss sharing system is a cornerstone of Islamic banking, embodying

the principles of equity and justice. This system is operationalized

through contracts like Mudarabah and Musharakah. In Mudarabah,

the bank provides capital to an entrepreneur who manages the

business, and profits are shared according to pre-agreed ratios, while

losses are borne by the bank unless due to negligence or violation of

contract terms. Musharakah involves a partnership where all partners

contribute capital and share in the profits and losses in proportion to

their investment (Khan, 2012: 23). An examination of Islamic

financial products and services offered for earning purposes reveals

a diverse portfolio that includes Sukuk (Islamic bonds), Takaful

(Islamic insurance), and various investment accounts. These

products are designed to generate earnings for the bank while

remaining compliant with Islamic law, which mandates that all

transactions be backed by tangible assets and that risk is shared

equitably between the bank and its clients. This adherence to Islamic

principles ensures that the financial activities are not only ethical but

also contribute to the economic well-being of all parties involved

(Vatandaş, 2021: 72).

V. Comparison of Rationality in Conventional and Islamic

Banking

The rationality principles in conventional and Islamic

banking systems reflect their underlying economic philosophies and

operational frameworks. While both systems aim to achieve

financial stability and economic growth, their approaches to

rationality are guided by distinct principles that shape their financial

products and services. An analysis of similarities reveals that both

conventional and Islamic banking systems strive to offer competitive

financial solutions, maintain customer satisfaction, and ensure the

sustainability of their operations. Both systems employ rigorous risk

assessment and management strategies to safeguard their interests

--14--

and those of their stakeholders (Hanif, 2011: 169). However, the

differences in rationality principles are pronounced, stemming from

the fundamental divergence in their ethical and operational

mandates. Conventional banking is primarily driven by profit

maximization and interest-based transactions, whereas Islamic

banking adheres to Shariah law, emphasizing ethical investments,

social justice, and the prohibition of interest (Riba). Islamic banking

promotes risk-sharing through profit and loss sharing arrangements,

contrasting with the risk-transfer mechanisms prevalent in

conventional banking (Hanif, 2011: 172).

Graphic 1- The Comparison of Profit and Interest Rate on Deposits

in Türkiye

* Profit ratio and interest ratio on deposits are maximum annual

rates.

Sources: Central Bank of the Republic of Türkiye (Electronic

Data Delivery System), The Participation Banks Association of

Türkiye (TKBB)

Graphic 1 displays a comparison of the annual profit rates

from Islamic banks versus the interest rates on deposits from

conventional banks in Türkiye over a period of eleven years, from

2012 to 2022. The data reveals the following trends. The profit rate

started at 9.97% in 2012 and saw fluctuations over the years, with a

notable increase to 18.07% in 2022. The interest rate began at

--15--

13.17% in 2012, with variations throughout the period, reaching a

peak of 29.88% in 2022. Both types of banks experienced growth in

rates, with conventional banks generally exhibiting higher rates

compared to Islamic banks. The year 2022 marked the highest profit

rate for Islamic banks at 18.07%, while conventional banks reached

their peak at 29.88% in the same year. The data indicates a trend of

increasing profitability for both Islamic and conventional banks,

with conventional banks maintaining a higher interest rate

throughout the observed period. It can be interpreted for rational

preferences. Rationality in economics often involves maximizing

one’s utility, which is not solely defined by financial returns. If

individuals derive utility from engaging in banking practices that

align with their ethical beliefs, their preference for Islamic banking

can be considered rational.

VI. Conclusion

Mainstream economic systems, where neoclassical theory

predominantly serves as the fundamental determinant, argue that

rationality is the preference for goods or services that provide the

highest individual satisfaction in a tangible or perceptible manner.

This activity, commonly referred to as the maximization of utility or

profit, is measured in a mathematical sense and manifests as the

selection of the highest quantity. To do otherwise is considered

irrational behavior, and irrational choices may stem from incomplete

information, social pressure, expectations, over/under reactions, or

other factors. Such preferences of individuals constitute the subject

of behavioral economics and encompass a significant portion of the

economy even in the modern world. If irrational choices, which are

the subject of behavioral economics or finance, involve opting for

less beneficial options for various reasons instead of maximizing

utility as accepted in mainstream economics, then Islamic banks

form the subject matter of behavioral economics in this regard.

However, if the maximization of utility includes people’s spiritual or

psychological benefits, then individuals will place Islamic banking

among their rational choices, regardless of the profit or financing

--16--

rates provided, as they derive maximum pleasure from choosing

what is permissible. Thus, faithful individuals will not compare

Islamic banks with conventional banks in terms of rationality and

will define their rational choice in favor of Islamic banking.

Nevertheless, this does not preclude the specific investigation and

evaluation of Islamic banking operations from the perspective of

behavioral finance, nor does it hinder their comparison with

conventional banks.

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References

Adewale, A.A., & Archer, S. (2019). Risk sharing in Islamic

banking (IFSB Working paper Series No: WP-10/05/2019).

https://islamicmarkets.com/publications/ifsb-working-paper-series-

risk-sharing-in-islamic-banking

Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013).

Islamic vs. conventional banking: Business model, efficiency and

stability. Journal of Banking & Finance, 34(2), 306-317.

https://doi.org/10.1016/j.jbankfin.2012.09.016

Bitar, M., Pukthuanthong, K., & Walker, T. (2018). The

effect of capital ratios on the risk, efficiency and profitability of

banks: Evidence from OECD countries. Journal of international

financial Markets, Institutions and Money, 53, 227-262.

https://doi.org/10.1016/j.intfin.2017.12.002

Chapra, M. U. (2008). The Islamic vision of development in

the light of Maqāsid al-sharī ‘ah. Islamic Research and Training

Institute Islamic Development Bank Jeddah.

https://www.researchgate.net/profile/Muhamed-

Chapra/publication/303499103_The_Islamic_Vision_of_Developm

ent_in_the_Light_of_Maqasid_Al-

Shari'ah/links/5745ad3608ae9f741b42dc44/The-Islamic-Vision-of-

Development-in-the-Light-of-Maqasid-Al-Shariah.pdf

El Melki, A., & Ben Salah Saidi, H. (2023). Ethical and

Socially Responsible Investments in the Islamic Banking Firms:

Heart, Mind, and Money: Religious Believes and Financial

Decision-Making in the Participatory Financing Contracts:

Charitable Donation Announcement Effect on Agents’ Level of

Effort and Commitment. In Green Finance Instruments, FinTech,

and Investment Strategies: Sustainable Portfolio Management in the

Post-COVID Era (pp. 81-123). Cham: Springer International

Publishing. https://doi.org/10.1007/978-3-031-29031-2_5

--18--

El-Gamal, M. A. (2006). Islamic finance: Law, economics,

and practice. Cambridge University Press. NY: New York

Ghaemi Asl, M., & Ghasemi Doudkanlou, M. (2022). How

do Islamic banks manage earnings? Application of various

measurement models in the Iranian Islamic banking system. ISRA

International Journal of Islamic Finance, 14(3), 274-288.

https://doi.org/10.1108/IJIF-02-2021-0040

Hanif, M. (2011). Differences and Similarities in Islamic and

Conventional Banking. International Journal of Business and Social

Science, 2(2), 166-175. https://ssrn.com/abstract=1712184

Horodecka, A., & Vozna, L. (2020). Between Individual and

Collective Rationality. In: Words, Objects and Events in Economics:

The Making of Economic Theory (pp. 139-158). Cham: Springer

International Publishing. https://doi.org/10.1007/978-3-030-52673-

3_9

Khan, O. M. (2012). An Examination of the Underlying

Rationale of the Profit and Loss Sharing System, With Special

Emphasis on the Mudarabah and Musharakah Within the Context of

Islamic Law and Banking. Journal of Finance, Accounting &

Management, 3(1), 23-31.

Kustin, B. S. (2017). Islamic (micro) finance and the

possibility of social justice (Doctoral dissertation, Johns Hopkins

University).

https://jscholarship.library.jhu.edu/server/api/core/bitstreams/fdae8

362-d0fd-4ce2-8b8e-3c3d4ed502c9/content

Siddiqi, M. N. (2006). Islamic banking and finance in theory

and practice: A survey of state of the art. Islamic Economic Studies,

13(2), 1-48.

http://www.irti.org/English/Research/Documents/IES/090.pdf

Vatandaş, E. (2021). Islamic Banking in Turkey: A Critical

Evaluation on Deficiencies, Necessities, and Challenges. Maruf

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İktisat İslâm İktisadı Araştırmaları Dergisi, 1(2), 68-82.

https://dergipark.org.tr/en/pub/marufiktisat/issue/69640/1110467

Wartiovaara, M. (2011). Rationality, REMM, and Individual

Value Creation. Journal of Business Ethics, 98(4), 641–648.

http://www.jstor.org/stable/41476157

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CHAPTER II

Empirical Analysis of House Price Shocks: Nonlinear

Unit Root Tests in Türkiye's NUTS 2 Regions

Mehmet ÖZCAN

1

Introduction

The dynamics of the housing market are important for all

macroeconomic systems. Housing, which is seen not only as a

consumption but also as an investment instrument, can be affected

by many social and economic factors that affect the expectations and

economic decision-making processes of economic agents. In recent

years, housing prices have been exposed to unpredictable and

upward shocks due to the developments in the Turkish economy and

the expectations created by heterodox economic approaches in

1

Associate Prof., Karamanoglu Mehmetbey University, Faculty of Economics and

Administrative Sciences, mehmetozcan@kmu.edu.tr, ORCID: 0000-0001-9082-0894

The findings of this study were first presented at the 6th International New York

Academic Research Congress on Humanities and Social Sciences, November 12-14,

2023, in Albany, New York, USA.

--21--

monetary policy. It should not be forgotten that the global financial

crisis experienced in the United States economy in 2008 was

triggered by housing valuations outside the economic logic.

Understanding the dynamics of the housing market, which can cause

a chain of problems even in a developed economy, is important for

interpreting the future of the Turkish economy. In this context, the

first objective of this study is to determine whether capital gains from

housing have a stationary process in the Turkish economy by

utilizing linear and nonlinear unit root tests. The second objective of

the study is to find out whether a shock in housing prices, which is

called the ripple effect, spreads to the surrounding regions and to

understand whether the housing price stocks in some regions affect

other regions.

In applied studies, it is important to understand whether

house prices follow a stationary process, in other words, whether

they have a stochastic trend or a deterministic trend, for several

reasons. First, in order for empirical analyses on the housing market

to yield trustable results, time series variables such as capital gains

calculated from house prices should be stationary. Secondly, for co-

integration, causality, and impulse response analyses, which are also

frequently used in empirical analysis, time series variables

representing the housing market, particularly house prices, should be

stationary. Finally, unit root tests are also used to examine the

Efficient Market hypothesis, which analyzes the market formation

of an asset price. House prices are also asset prices and therefore the

validity of the efficient market hypothesis should also be

investigated in housing markets. According to the efficient market

hypothesis, the price of an asset is formed using all information,

news, and expectations in the relevant market. This means that all

economic agents in a market have access to the same information at

the same time and make their investment decisions accordingly. In a

market where all information and news reach all investors

symmetrically, asset prices are formed randomly. Thus, no investor

can earn more than the average. In his study, Fama (1970)

categorized the Efficient Market hypothesis into three groups. These

--22--

are weak form efficiency, semi-strong efficiency and strong

efficiency. Among these three definitions of efficiency, the weak

form of efficiency is also known as the random walk hypothesis.

According to the weak form efficiency hypothesis, since the current

price of an asset contains all past information, it is very difficult to

make inferences about future price values based on past values of the

price of that asset. Thus, it becomes virtually impossible to earn

much above-average returns on the asset. Weak-form efficiency

hypothesis can be analyzed by unit root tests. At this point, whether

the housing market satisfies the weak form efficiency hypothesis

will be examined by testing for unit roots in the capital gains from

housing purchases. If  is the average or index value of house prices

at the current time, the capital gains rate  in the relevant housing

market can be expressed as follows:

󰇛󰇜󰇛󰇜󰇛󰇜

Another important point about the housing market is to

understand whether a shock that manifests itself in the form of an

increase or decrease in house prices in a particular region spreads to

the surrounding regions. According to common economic wisdom,

house prices in different regions do not move together. Housing

prices are often influenced by the unique supply and demand

dynamics of the regional housing market. These dynamics may be

driven by various sociological and economic factors. These factors,

in turn, vary from region to region. However, many empirical studies

have found that house prices have spillover effects (Canarella et al.,

2012). According to Meen (1999), there are many reasons for the

emergence of the spillover effect, also known as the ripple effect, in

house prices. The most important of these is migration. Migration is

an exogenous shock for a regional economy. Such an exogenous

intervention can disrupt the long-standing price equilibrium in the

local housing market. Once the housing price equilibrium in the first

regions and/or metropolitan areas to experience migration is

disrupted, individuals who are unable to meet the housing demand

in those regions and metropolitan areas may turn to housing in

neighboring regions and cities, thereby increasing the demand for

--23--

housing in those regions and cities and thus disrupting the price

equilibrium in the neighboring regions as well. Türkiye has been

subjected to an intense migration flow in recent years. It would not

be misleading to expect migration to change the pricing equilibrium

in the local and national housing market in Türkiye and for this

pricing shock to propagate within Türkiye. Empirically, according

to Meen (1999), the ripple effect is the stationarity of the ratio

(logarithmic difference) of prices in a local housing market to

national prices. Accordingly, the analysis of the ripple effect for each

region according to the NUTS 2 classification will be carried out

with the series defined as follows:



󰇛

󰇜󰇛󰇜

Where 

 is the house price index value in the  region and



 is the house price index value calculated for Türkiye as a whole.

Method

Linear and nonlinear unit root tests will be utilized in this

study. The study that initiated the unit root literature in time series

econometrics is the Dickey-Fuller test. The method proposed by

Dickey and Fuller (1979) is based on a model representing a first

order autoregressive process. The main criticism of the Dickey-

Fuller test is that the model does not include autocorrelation.

Therefore, the Dickey-Fuller test was improved by adding lagged

values of the time series variable to the model and re-presented as

the Augmented Dickey and Fuller (1981) (Augmented Dickey-

Fuller, ADF) test. The most comprehensive ADF model for the

variables to be analyzed in this study, including the constant and

trend components, is as follows:

 

 󰇛󰇜

 

 󰇛󰇜

In Equations (3) and (4), p is the appropriate number of lags,

 and  are the error terms that meet the standard assumptions. In

--24--

these models, whether the variables have a unit root process is

determined by testing the alternative hypothesis   against

the null hypothesis  . The appropriate lag  is determined

by various information criteria such as Akaike and Bayesian.

The ADF test is a linear unit root test. However, in economic

life, structural shocks may occur that unexpectedly deviate

macroeconomic aggregates from their long-run trends. For example,

economic crises and natural disasters such as the pandemic

experienced in 2020 are important shocks that disrupt the general

economic functioning. These shocks are called structural breaks in

economic time series. The concept of structural break was

introduced to the unit root literature by Perron (1989). Following this

study, the structural break literature has expanded rapidly, and many

methods have been introduced. Until Leybourne et al. (1998) (LNV),

all unit root tests with structural breaks were developed for cases

where the structural break occurred suddenly, changing the path of

the time series drastically. However, the LNV test came up with a

new unit root test that models both sudden structural breaks and

relatively softer structural breaks that have their effects spread over

time. In this method, structural breaks are modeled with logistic

functions instead of dummy variables. LNV yields three models,

Model A, Model B and Model C, which can be expressed as follows:

󰇛󰇜󰇛󰇜

󰇛󰇜󰇛󰇜

󰇛󰇜󰇛󰇜󰇛󰇜

In Equations (5), (6) and (7),  is the error term and 󰇛󰇜

is a logistic function denoted as follows:

󰇛󰇜󰇛󰇝󰇟󰇠󰇞󰇜󰇛󰇜

Here τ is the time at which the structural change occurs and

γ is the parameter indicating the rate of structural change, which is

greater than zero. As γ takes larger values, the soft character of the

structural change changes towards a hard fracture. LNV has two

stages. In the first stage, the parameter estimates of the regression

--25--

models shown in Equations (5), (6) and (7) are made and the

residuals are obtained. In the second stage, these residual series are

modeled with the models expressed in the ADF unit root test and the

unit root test is performed with the help of a test statistic defined by

ADF. However, it should be noted that although LNV utilizes the

ADF, the two unit root tests have test statistics with different

distributions. The model to be estimated in the second stage is as

follows:  



 󰇛󰇜

In Equation (9),  is the number of appropriate lags and 

is the standard random error term. The t statistic calculated for  in

Equation (9) is considered as the unit root test statistic. Depending

on the type of model from which the residual series are obtained

(Equation (5), (6) or (7)), the LNV test statistics are denoted as ,

󰇛󰇜 and , respectively, and these test statistics test the following

hypotheses:  

󰇛󰇜󰇛󰇜󰇛󰇜 󰇛󰇜

The third unit root test to be used in this study is Caner and

Hansen (2001) (CH). Caner and Hansen (2001) replace the

autoregressive model proposed in the ADF test with a threshold

autoregressive model:

 



 󰇛󰇜 



 󰇛󰇜

In Equation (11),  is an indicator function that takes the

value 0 when   and 1 when  .  is the number of

lags chosen and  is the lag parameter in threshold autoregressive

models. In the CH Unit root test, two Wald statistics are

recommended to test the null hypothesis  and 4

alternative hypotheses. In order to avoid further overcrowding, only



 and  and the

 and  statistics that test these hypotheses will be considered.

The  and  statistics can be expressed as follows:

--26--

 



󰇛󰇜

 

󰇝

󰇞

󰇝

󰇞󰇛󰇜

In Equations (12) and (13),  and  are the t statistic values

calculated for the parameter estimates  and  in Equation (11),

respectively.

Findings

ADF, LNV and CH unit root tests are applied to the capital

gains  and ripple effect  variables constructed on the basis of

housing prices in Türkiye and the results are presented in Table 1

and Table 2. Data are collected from the Electronic Data Distribution

System of the Central Bank of the Republic of Türkiye for Türkiye

as a whole and for 26 regions at NUTS 2 level. The data cover the

period between May 2014 and August 2022 and consist of a total of

100 observations.

Table 1. Unit Root Test Results for Capital Gains Variable 

Bölgeler

ADF

LNV 

LNV

󰇛󰇜

LNV 

CH 



CH 



Türkiye

-2.2005

-2.5847

-2.5906

-3.0036

5.5969

8.5746

İstanbul

-2.2318

-2.0010

-1.9822

-2.2846

23.1869

Ankara

-2.1264

-3.1073

-3.2695

-3.6405

7.1599

İzmir

-1.6514

-5.5452

-3.6405

-3.8041

7.1106

9.4894

Edirne, Kırklareli,

Tekirdağ

-1.4972

-6.4886

-6.4924

-4.6903

14.8272

15.0133

Balıkesir,

Çanakkale

-3.1248

-4.9813

-5.1200

-5.7910

11.2922

14.2875

Aydın, Denizli,

Muğla

-3.1024

-4.5735

-4.7970

-5.0612

13.8081

18.9372

Afyonkarahisar,

Kütahya, Manisa,

Uşak

-1.5938

-5.5848

-5.6915

-5.9844

8.7501

13.5428

Bursa, Eskişehir,

Bilecik

-1.5039

-5.4603

-3.5691

-3.7760

14.0725

15.4138

Bolu, Kocaeli,

Sakarya, Yalova,

Düzce

-0.8781

-3.6426

-3.6278

-3.9847

11.9623

12.7933

Konya, Karaman

-1.6054

-6.1726

-6.2965

-6.6619

10.9315

15.3270

--27--

Antalya, Burdur,

Isparta

-2.4162

-4.9300

-5.2712

-3.7685

13.9483

18.0193

Adana, Mersin

-2.0885

-4.5934

-4.6036

-5.5151

10.8768

Hatay,

Kahramanmaraş,

Osmaniye

-2.0834

-5.7485

-3.6647

-4.3969

7.3132

10.3626

Nevşehir, Niğde,

Aksaray,

Kırıkkale, Kırşehir

-3.2573

-6.9554

-7.4568

-7.5763

6.0255

34.0078

Kayseri, Sivas,

Yozgat

-2.7211

-7.4514

-7.6062

-7.7689

11.3114

20.0242

Zonguldak, Bartın,

Karabük

-1.9195

-7.3875

-7.4822

-7.5089

4.2653

4.7957

Çankırı,

Kastamonu, Sinop

-3.3159

-6.8859

-6.8546

-7.4699

21.5632

Samsun, Çorum,

Amasya, Tokat

-1.9121

-6.9996

-7.3729

-7.8671

9.8785

10.6974

Artvin, Giresun,

Gümüşhane, Ordu,

Rize, Trabzon

-2.0520

-7.6563

-7.6732

-7.8479

3.0391

3.8270

Erzurum,

Erzincan, Bayburt

-3.4546

-6.6527

-7.0149

-7.4932

8.7950

12.6708

Ağrı, Ardahan,

Kars, Iğdır

-3.2608

-6.8511

-7.1142

-6.9280

9.3487

9.3672

Bingöl, Elâzığ,

Malatya, Tunceli

-1.6762

-7.8064

-8.1288

-8.1233

12.6373

Van, Bitlis,

Hakkâri, Muş

-1.2201

-7.7774

-8.1598

-8.0217

11.226

11.2260

Kilis, Adıyaman,

Gaziantep

-2.7914

-5.9782

-5.8794

-6.0229

4.8758

5.7286

Diyarbakır,

Şanlıurfa

-2.1062

-5.6685

-6.1346

-4.4551

9.5544

11.4589

Batman, Mardin,

Siirt, Şırnak

-2.4131

-6.8172

-4.8258

-4.8941

8.8188

11.6609

5% Critical Values: ADF (Constant+Trend)=-3.4558, LNV MA= -4.232, LNV MB= -

4.771, LNV MC= -5.011, CH R1= 17.6231, CH R2= 17.8530. The results of the tests

where the null hypothesis of no unit root can be rejected at the 5% significance level are

in bold type. For all tests, the maximum lag is set as 10 and the appropriate lag is

determined according to the Bayesian Information Criterion.

--28--

Table 2. Unit root test results for the ripple effect variable 

Bölgeler

ADF

LNV 

LNV

󰇛󰇜

LNV 

CH 



CH 



İstanbul

-2.3627

-2.9712

-0.3873

-5.1724

20.4910

22.7580

Ankara

-1.4159

-3.1525

-3.0892

-2.6499

27.4257

27.8177

İzmir

-0.7469

-2.5874

-2.8899

-2.7105

9.0518

Edirne,

Kırklareli,

Tekirdağ

-0.4960

-1.1739

-3.5475

-3.0129

17.4301

Balıkesir,

Çanakkale

-1.3349

-3.6001

-3.9772

-6.4104

7.7950

Aydın, Denizli,

Muğla

-2.1379

-3.1374

-6.0613

-6.0775

4.5008

8.4710

Afyonkarahisar,

Kütahya, Manisa,

Uşak

-0.4691

-2.6506

-2.7000

-2.7193

6.3847

Bursa, Eskişehir,

Bilecik

-0.6722

-0.9616

-2.9081

-2.8555

16.5204

Bolu, Kocaeli,

Sakarya, Yalova,

Düzce

-1.1921

-1.7746

-4.6391

-3.7730

17.6911

17.7588

Konya, Karaman

-2.5890

-2.6948

-2.7363

-5.0201

16.3549

16.3569

Antalya, Burdur,

Isparta

0.2891

-3.2373

-3.6695

-2.6351

0.0357

27.4619

Adana, Mersin

-1.3861

-1.3948

-2.4492

-3.5953

15.6206

17.8013

Hatay,

Kahramanmaraş,

Osmaniye

-2.2238

-0.4961

-2.4054

-5.7342

17.1692

Nevşehir, Niğde,

Aksaray,

Kırıkkale,

Kırşehir

-1.9089

-0.7585

-4.3881

-4.9415

12.7604

Kayseri, Sivas,

Yozgat

-1.5173

-2.9236

-4.9406

-5.3213

5.9627

Zonguldak,

Bartın, Karabük

-1.4176

-2.4957

-3.2871

-4.6619

14.4578

Çankırı,

Kastamonu,

Sinop

-1.0505

-3.0133

-3.0554

-3.0601

9.2207

Samsun, Çorum,

Amasya, Tokat

-1.5647

-1.8958

-4.3217

-4.9952

12.0565

14.4491

--29--

Artvin, Giresun,

Gümüşhane,

Ordu, Rize,

Trabzon

-0.7813

-3.1976

-3.4968

-3.5314

2.4625

9.5933

Erzurum,

Erzincan,

Bayburt

-0.6792

-3.2184

-3.0671

-3.0682

3.7934

4.5138

Ağrı, Ardahan,

Kars, Iğdır

-1.9218

-0.2236

-3.3330

-4.5752

15.8262

17.6727

Bingöl, Elâzığ,

Malatya, Tunceli

0.2787

-1.7918

-2.5788

-4.8825

14.4346

Van, Bitlis,

Hakkâri, Muş

-1.251

-2.0122

-3.4467

-5.4729

13.3251

Kilis, Adıyaman,

Gaziantep

-2.1788

-1.3173

-0.3981

-0.7518

16.2890

Diyarbakır,

Şanlıurfa

-2.113

-1.9909

-3.0019

-2.8107

23.4535

Batman, Mardin,

Siirt, Şırnak

-1.5162

-1.9078

-4.0361

-4.5343

22.6316

5% Critical Values: ADF (Constant+Trend)=-3.4558, LNV MA= -4.232, LNV MB= -

4.771, LNV MC= -5.011, CH R1= 17.6231, CH R2= 17.8530. The results of the tests

where the null hypothesis of no unit root can be rejected at the 5% significance level are

in bold type. For all tests, the maximum lag is set as 10 and the appropriate lag is

determined according to the Bayesian Information Criterion.

In addition to summarizing the results in Table 1 and Table

2, the results of some selected test statistics can also be displayed on

maps divided into regions at NUTS 2 level. Map representation may

lead to a different perspective in the interpretation of the results.

--30--

Figure 1. Map representation of LNV test results for capital

gains variable 

Figure 2. Map representation of CH 

 test results for capital

gains variable 

--31--

Figure 3. Map representation of LNV  test results for the ripple

effect variable 

Figure 4. Map representation of CH 

 test results for the ripple

effect variable 

Discussion And Conclusion

In the analysis where weak form efficiency is tested and the

findings are summarized in Table 1, all unit root tests confirm that

the housing market in Türkiye is weakly efficient. However, when

analyzed at the regional level, LNV tests that take into account the

--32--

structural break dynamics (at least two of them) show that the

housing market in metropolitan areas such as Istanbul, Ankara and

Izmir, as well as Bursa-Eskişehir-Bilecik, Bolu-Kocaeli-Sakarya-

Yalova-Düzce, Hatay-Kahramanmaraş-Osmaniye regions are

weakly efficient, but pricing in other regions is realized in an

inefficient market environment. Therefore, housing investors in

regions other than the above-mentioned regions may take advantage

of the inefficient market to earn above-average incomes. According

to the findings of Caner and Hansen (2001), who conducted a unit

root test based on nonlinear regime-switching dynamics, housing

markets are weakly inefficient in Istanbul, Aydın-Denizli-Muğla,

Antalya-Burdur-Isparta, Nevşehir-Niğde-Aksaray-Kırıkkale-

Kırşehir, Kayseri-Sivas-Yozgat, Çankırı-Kastamonu-Sinop, while

housing markets are efficient in other regions. Accordingly, it is

possible for real estate investors to earn above-average returns in the

regions mentioned in the previous sentence.

In the analyses for the ripple or spillover effect, the linear

ADF test finds support for the absence of a ripple effect in housing

prices in any region. The LNV nonlinear unit root test with structural

breaks finds a spillover effect in house prices in Istanbul, Balıkesir-

Çanakkale, Aydın-Denizli-Muğla, Konya-Karaman, Hatay-

Kahramanmaraş-Osmaniye, Kayseri-Sivas-Yozgat and Van-Bitlis-

Hakkari-Muş regions. In the other nonlinear unit root test, Caner and

Hansen (2001) found a ripple effect in house prices in Istanbul,

Ankara, Antalya-Burdur-Isparta, Diyarbakır-Şanlıurfa and Batman-

Mardin-Siirt-Şırnak regions. In particular, the findings of Caner and

Hansen (2001) point directly to the cities bordering Syria,

metropolises and Antalya and its surroundings, which host a large

number of guests from northern countries, which can be interpreted

as a contribution of the migration factor to the spillover effect in

house prices.

--33--

REFERENCES

Canarella, G., Miller S. & Pollard S. (2012) Unit Roots and

Structural Change: An Application to US House Price Indices.

Urban Studies, 49 (4): 757-76.

https://doi.org/10.1177/0042098011404935.

Caner, M. & Hansen B. E. (2001) Threshold Autoregression

with a Unit Root. Econometrica, 69 (6): 1555-96.

https://doi.org/10.1111/1468-0262.00257.

Dickey, D. A. & Fuller W. A. (1979) Distribution of the

Estimators for Autoregressive Time Series with a Unit Root. Journal

of the American Statistical Association, 74 (366a): 427-31.

https://doi.org/10.1080/01621459.1979.10482531.

Dickey, D. A. & Fuller W. A. (1981) Likelihood Ratio

Statistics for Autoregressive Time Series with a Unit Root.

Econometrica, 49 (4): 1057-72. https://doi.org/10.2307/1912517.

Fama, E. F. (1970) Efficient Capital Markets: A Review of

Theory and Empirical Work. The Journal of Finance, 25 (2): 383.

https://doi.org/10.2307/2325486.

Leybourne, S., Newbold, P. & Vougas D. (1998) Unit Roots

and Smooth Transitions. Journal of Time Series Analysis, 19 (1): 83-

97. https://doi.org/10.1111/1467-9892.00078.

Meen, G. (1999) Regional House Prices and the Ripple

Effect: A New Interpretation. Housing Studies, 14 (6): 733-53.

https://doi.org/10.1080/02673039982524.

Perron, P. (1989) The Great Crash, the Oil Price Shock, and

the Unit Root Hypothesis. Econometrica, 57 (6): 1361-1401.

https://doi.org/10.2307/1913712.

--34--

CHAPTER III

From Bretton Woods To The New Global Financial

System

Haluk YERGİN

1

Nida GÜNSAN

2

Introduction

The gold standard had been on the verge of death for a long time,

but few mourned when President Richard Nixon closed the "gold

window" on 15 August 1971, allowing the dollar to be exchanged

for gold in certain limited circumstances, thus eliminating the last

vestige of the standard. Since then, the centuries-old link between

money and precious metals has been severed.

Pala, 2019, The Ascent of Money-A Financial History of the World

s.52

1

Prof.Dr., Van Yüzüncü Yıl Üniversitesi, İİBF, İktisat Bölümü, ORCID: 0000-0002-8168-

9115

2

Dr., Bağımsız Araştırmacı, ORCID:0000-0001-7014-3099

--35--

The international monetary system is a set of rules,

institutions, agreements, and practices that regulate the existing

exchange rate regimes and payment relations between countries

(Seyidoğlu, 2016). Theoretically, the international reserve currency

should first be stable. Secondly, its supply should be flexible enough

to allow timely adjustments to changing demand. Third, such

adjustments should be independent of the economic conditions and

interests of any country (Xiaochuan, 2009). The existing

international monetary system, and its functioning (e.g. international

liquidity, exchange rate and capital flow regimes, adjustment of

external imbalances) adapts to the different economic conditions and

policy preferences of each country (Dorrucci & McKay, 2011). The

international monetary system has changed over time depending on

the changes in international trade and finance and political

conjunctures and has shaped the world economy and continues to do

so. If we analyze this system from a periodical perspective, we can

see that it has gone through five phases in total, and today, there are

thoughts that the sixth one is at the door. However, the key to

understanding the future is to know the past thoroughly, and

statements can be made about what kind of system will be adopted

today and in the future based on the experiences and developments

in the past. When we first look at this issue, even if we think that the

changes will only concern the states, it should not be forgotten that

they have social and individual consequences. Because this system

is universal, it has the power to radically affect states, households,

and all economic units. It is one of the most important challenges of

the 21st century not to be caught unprepared for the radical changes

that may occur in the international monetary system to follow the

developments closely and to adapt to the changes that will emerge

immediately (Akdoğan, 2020).

The first part of the study explains the emergence of the gold

standard system, how it was implemented, and its collapse. The

second part deals with the chaotic period between World War I and

World War II. The third part deals with the emergence and collapse

of the Bretton Woods System. In the fourth part, it is explained how

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the Bretton Woods system, which collapsed in 1971, has continued

until today. This part is very important in the study. In 1971, the

Bretton Woods System collapsed when the US abolished the

convertibility requirement and the system, which had been in

existence for 52 years, started to crack within the financial system.

Adam Smith likened the proper functioning of the global financial

system to a revolving wheel. With shocks such as Covid-19, the

rupture of the supply chain, the Russian-Ukrainian War, and the

energy crisis, the wheels are now having difficulty turning in the

economy, which is the cornerstone of countries. In the current

financial global financial system, signs of change in the rules that

continue from the Bretton Woods system have begun. It is expected

that a new financial system will emerge. Finally, the study is

completed with the conclusion section.

Gold Standard System

Since the earliest ages of history, mankind has used various

goods, precious metals, or other instruments as money to realize their

exchanges. However, the first regularly applied monetary system is

the gold standard (Seyidoğlu, 2016). The system of the gold

monetary standard is as follows; each country defined the value of

its money with a certain amount of gold and a fixed exchange rate

was established between currencies depending on the gold content.

Due to Britain's dominance in global trade and the soundness of its

financial institutions, London naturally became the center of the

international monetary system in system. In this system, if a country

ran a balance of payments deficit, gold would flow out of that

country, thereby reducing the money supply. This led to a fall in

prices, which in turn led to an increase in exports and a decrease in

imports. When the country had a balance of payments surplus, the

opposite was the case. Thus, the balance of payments was returning

to balance. This cycle was used by David Hume in 1752 to oppose

the mercantilist view of foreign trade. The basic cycle in the gold

standard was that when gold inflows into the country, the money

supply would increase and prices would rise, or vice versa. In other

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words, in this system, the balance of payments was automatically

balanced. Therefore, a foreign trade surplus cannot be sustained

under the gold standard (Çağlar & Dışkaya, 2018). The conversion

of gold into national currencies at the parity determined in the gold

standard application is free in every country. This freedom ensures

that the exchange rate contained in the parities (1 ounce of gold =

4.24 pounds, 1 ounce of gold = 20.67 dollars, and therefore 1 pound

= 4.87 dollars) is valid in every country (Yalçınkaya & Özden,

2019).

The main argument used by the central bank, the key

institution in the gold money system, to successfully carry out the

operations it undertook was the discount rate, which would affect

market interest rates. A rise in interest rates affected the economic

order in two ways: Firstly, by making borrowing more expensive, it

reduced investment expenditure and domestic demand. The reason

was to increase competitiveness and stimulate exports by putting

downward pressure on domestic prices. Secondly, it was a method

of attracting hot money from abroad to improve the balance of

payments and capital account. In addition, with the OMO in

circulation at the CB, it directly affected the amount of money and

the financial order (Bal, 2022).

The conditions necessary for the functioning of the gold

currency system are as follows (Eser, 2022):

1. The value of the currency must be in gold.

2. Gold can be converted into money and money can be

converted into gold at the determined rate.

3. The export and import of gold from the country is free.

When the First World War was about to start, banks wanted

to exchange their securities. This was a serious burden on the Central

Banks. Thus, gold inflows to lending/receiving countries started and

the reserves of England and Germany started to increase. To finance

war expenditures in case of war, countries such as Germany, France,

and Russia stopped the convertibility of their currencies into gold

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banned the export of gold, and took measures against the demands

of the public. The UK, which was legally within the system, de facto

left the system since it was centralized. This system came to an end

during the First World War (Yaman, 2003).

The Chaotic Period Between World War I and World War II

Between the First and Second World Wars, developed

countries aimed to prevent economic growth, full employment, and

protectionism after the war due to the economic burdens of the 1929

depression and wars. Leading the world countries, the USA came to

the forefront in the establishment of the monetary system (Güder &

Çetin, 2021). The chaotic period between World War I and World

War II was one of the darkest periods in the world. The end of the

First World War and the severe economic and social problems

brought about by the war had collapsed like a black cloud of

uncertainty in the world order. Countries started to take steps to

correct the deteriorating economy and to gain a competitive

advantage in international trade. For this reason, they have made

attempts to increase their exports. The countries' desire to increase

their exports led to currency wars. At the end of the First World War,

countries endeavored to return to the gold standard. Firstly, the USA,

which had lower inflation, returned to the gold standard by lifting

export restrictions. In 1925, the UK and Switzerland, France,

Scandinavian countries also returned to the gold standard system.

However, by 1928, it was realized that the international gold

standard was unsustainable. After the First World War, the major

countries endeavored to restore economic equilibrium, pursuing a

policy of sterilization of gold, which led to the disruption of the

automatic equalization mechanism of the gold standard. This was a

triggering event for the Economic Depression of 1929. In a short

period, the economic depression started in the USA and affected the

whole world. The rise in capital markets negatively affected

production and employment. The economic shock, which showed

more serious effects in America and Europe, deeply shook the

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economies of the whole world and caused the collapse of the gold

standard.