Iran is becoming a lot like the Soviet Union
Güven Sak, PhD
07 February 2012
I see a resemblance between Iran and the collapsed Soviet Union: Inventions focused on a single area spread throughout the economy. Will the sanctions the international community has started to impose on Iran to prevent the country from having atom bombs affect the Iranian economy negatively? They will, and they already are. What is more, these sanctions and the desire of the country to develop atom bombs are causing long-term structural damage to the country’s economy. I feel like these sanctions in some ways are turning Iran into the late Soviet Union. I hope I am wrong. I feel sorry for Iran. Let me tell you why.
[More]
Why the Mark Zuckerbergs of the world don’t live in Turkey
06 February 2012
Facebook is about to go public. The company’s value is estimated at $100 billion and the personal wealth of its 27 year-old founder, Mark Zuckerberg, at $27 billion. Facebook is ten times as valuable as Turkey’s biggest company, Tüpraş, and Zuckerberg’s personal wealth is three times the total wealth of the richest Turkish family.
[More]
Inflation within the current picture...
Fatih Özatay, PhD
04 February 2012
Clearly, should the relatively positive climate that emerged along with the beginning of 2012 continues, Turkey’s inflation will be affected positively. Annual inflation in 2011 stood at 10.4 percent. After January 2012, the rate increased to 10.6 percent. H and l indicators also increased slightly in January: annual inflation increased by 0.2 points to 8.8 percent under the H index and by 0.3 to 8.4 percent under the l index. The Central Bank of Turkey, CBT, expects a remarkable drop in annual inflation particularly during the last quarter of 2012. The mid-point of year-end inflation forecasts is 6.5 percent, above the 5 percent target. Can this forecast be realized? It is possible that this forecast will be realized. First, though higher than others, the official growth estimate at 4 p
[More]
It’s the domestic demand, stupid
Güven Sak, PhD
04 February 2012
Growth always comes from domestic demand in Turkey. Controlling domestic demand through fiscal and monetary discipline is once again the major issue of the day. There are two types of countries in the world when it comes to experience in growth: Ones in which internal demand drives the economy, and others, where external demand does the job. Turkey is in the former category while China is in the latter. High domestic savings in countries like China allow for an exportable surplus to be generated, while in countries like Turkey, the domestic savings rate declines to nil and the exportable surplus shrinks. High growth means a high current account deficit in this category. That is the source of Turkey’s addiction to foreign fund inflows. Is that a bad thing? Definitely, because it ma
[More]
Turkey is becoming just like China
Güven Sak, PhD
03 February 2012
The new draft of the Capital Markets Law will reinforce the notion that Turkey is becoming just like China. It really is. We are witnessing appealing debates. Turkey is becoming just like China. The signs are coming one after another. First, we took the growth record of 2011 off the hands of China. Turkey outperformed China in growth in the first three quarters of 2011. We were delighted, though there was nothing to be delighted about. This was the first sign. Then came the second one: American novelist Paul Auster refused to visit Turkey for his new book, which was published first in Turkey. He said he would not visit countries such as China and Turkey that limited the freedom of the press and imprisoned journalists. Our prime minister talked about this issue joyfully, for some reason. I
[More]
Turkey, Israel and Hamas
Nihat Ali Özcan, PhD
02 February 2012
The Palestine question was the most popular issue in the Turkish political Islam movement between 1960 and 1980. It had an extremely significant role in building the political Islam identity of the country.
[More]
The search for a new monetary policy (conclusion)
Fatih Özatay, PhD
02 February 2012
There are several ways to harmonize the policy tool devoted to ensure financial stability and to ensure price stability. Now it’s finally time for the last commentary of the series. Here is how I concluded on Tuesday: “The policy rate is a strong tool as long as it can affect the market interest rate. The way to affect the market rate, however, is to ensure that the short term market interest rate and the policy rate stand close to each other. However, the CBT has been allowing the former deviate continuously from the latter, in different directions and magnitudes. In a nutshell, in order to ensure that the macro-prudential tool serves its purpose, the CBT is allowing the policy rate lose its influence as a policy tool. How can the two tools work harmoniously?”
[More]
The search for a new monetary policy (5)
Fatih Özatay, PhD
31 January 2012
In order to ensure that the macro-prudential tool serves its purpose, the CBT is allowing the policy rate lose its influence as a policy tool. On Saturday, I stated that the Central Bank of Turkey (CBT) has used the required reserve ratio as a macroprudential policy tool with the aim to lower the risk of financial instability stemming from rapid credit growth. This policy attempt, however, encountered a dilemma: If the banks wanted to maintain the current pace of increase in credit supply, they could offset the funds (deposits) the CBT withdrew via increasing reserve requirements by borrowing from the CBT on a weekly basis since the maturity of the withdrawn funds were remarkably low. In order for the weekly interest rate, the other policy tool of the CBT, to influence the market interest
[More]
Those without fast broadband access are losers
Güven Sak, PhD
31 January 2012
A country without fast broadband will raise losers without professions, instead of manufacturing a domestic car. Turkey still lags behind in terms of fast broadband access, which is neither prevalent nor cheap. It is relatively better compared to in the past, but still insufficient. Have you ever thought what it means not to have fast broadband access to the Internet? A country which lacks fast broadband access cannot manufacture domestic cars. Nor can it make innovations. All of it is empty talk. Fast Internet connections tie societies and countries together. Those who cannot surf the Internet at high connection speeds are and will be losers. Today let me talk about this.
[More]
The search for a new monetary policy (4)
Fatih Özatay, PhD
28 January 2012
If the steps taken to launch the reserve requirement policy had not disturbed the policy rate mechanism, we would not have cared about this non-functionality. I am continuing with the fourth commentary of the series. I called the prevalent pre-crisis monetary policy the “classical policy.” Then, I drew the framework of a “new policy” addressed frequently in both theory and practice though there is no common agreement on it. The new policy suggests how central banks have to set the value of at least two policy tools: the policy rate and macro-prudential policy tool.
[More]
