Economic Growth Under Embargoes in North Cyprus: An Input-Output Analysis

Abstract: The North Cyprus economy, under economic embargo since 1983, has been struggling to eradicate the income difference with South Cyprus with extremely limited resources. This paper examines the North Cyprus economy with a particular emphasis on its response to economic embargoes. It also examines how important economic embargoes would be (or have been) to the North Cyprus economy. For this purpose, total economic growth is decomposed with respect to different components of demand. The results show that despite the presence of embargoes, external demand and the availability of import flows are detrimental factors for economic growth. Domestic final demand is an equally important source of growth in the North Cyprus economy.