Abstract.      The article examines the path of Turkey’s economic development since the Ottoman period up to the present day. The author offers not to follow the common approach to the periodization of the process of economic modernization in Turkey based on the changing importance of state enterprise (public sector). The matter is that such an approach fails to explain enough convincingly the fact of persistent Turkey’s economic lag from South Korea. The latter has started the catch-up development much later but today stays higher in all international economic ratings than Turkey. As an alternative the author identifies main periods in Turkey’s history in accordance with specific features of their fiscal and monetary policies. Within this approach, the breaking point in the process of Turkish economic modernization is seen in the middle of XX century. After 1950, the country entered a period of chronic budget deficits. Due to subordinate status of the Central Bank the money supply and inflation was considerably increased. The main reason for the turnabout in the financial policy was the change in the country’s political system, i.e. Turkey’s transition to the regime of multi-party democracy, tough inter-party competition and, as a result, commitment of the authorities to populist policies. Excessive budget expenditures were used by different governments for their own specific aims. However, a high level of domestic consumption became a general feature of the budgetary policy of Turkey. It was closely related to the rather high capacity of the domestic market and the growth of foreign debt. The overheated domestic market caused a certain inconsistency in the implementation of the export-oriented model and delayed exports’ diversification. This model did not change critically in the 2000s. Even though the country showed progress in terms of financial stabilization, serious problems still persist. While budgetary deficit has been basically solved Turkey still faces growing current account deficit and indebtedness of the private sector, the decline in savings’ rate and the burst of consumer credits. The country’s inability to develop on its own financial basis proves to be its most fundamental weakness. This openly showed up in 2013 because of the reorientation of international financial flows from emerging markets to developed countries.