Protect the rich, please
Güven Sak, PhD
27 January 2012
It has become an urgent matter of debate that some parts of society are deprived of the benefits of the world. These days we need to protect the rich. They are kind of an endangered species now. Their number has been decreasing gradually around the world, although their wealth has been increasing. Wealth now is accumulated in the hands of fewer individuals. We are living in a world where the number of those who live in material deprivation is increasing compared to those who do not. On top of this, everyone, starting with Obama, has embarked on a rich hunt. Signs of the doomsday are all around: The US President said, as no soldier should be left behind in military operations, no one should be left behind alone in society. The main theme of the Davos meetings was income distribution. Rich p
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The PKK question and Erdoğan’s tough choice
Nihat Ali Özcan, PhD
26 January 2012
The agenda is changing with dizzying speed in Turkey, but there are unchangeable issues, like the Kurdistan Workers’ Party (PKK) question. Unfortunately, as winter ends, we all know that we will start talking about PKK violence soon.For the first time in a while, family members tried to visit PKK leader Abdullah Öcalan on the island where he is serving his sentence. However, he refused to meet with his visitors and forwarded only a brief note. “The process is very fragile. It is not correct to meet at this stage. Everything is entangled. We will not meet.” Öcalan’s isolation, which has continued since last summer, has thus been extended further, but this time on his own accord. When considering experiences after a summer of fierce conflict, Öcalan’s reaction, as well as the governme
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The search for a new monetary policy (3)
Fatih Özatay, PhD
26 January 2012
The policy rate and the macro-prudential policy tool shall counteract each other in order to prove fruitful. Here is the third commentary of the series. In the previous commentary, I summarized the monetary policy commonly applied before the global crisis which I called “the classical policy.” Then, I drew a monetary policy framework I called “the new policy”, which is voiced frequently both in theory and practice. 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. Extreme risk-taking in periods of economic growth The rationale for macro-prudential policy tools can be explained as such: in periods of rapid economic growth, the perception that thing will always go well and triggers the risk-taki
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The search for a new monetary policy (2)
Fatih Özatay, PhD
24 January 2012
It would be a rational expectation that as real interest rate increases, consumption and investment expenditures, that is, demand and production, will decrease, and vice versa. I would like to continue with the new monetary policy series straight. Today I will discuss how to revise the monetary policy focused solely on price stability in a way that it regards both price and financial stability. I will call the former monetary policy based on price stability “the classical monetary policy.” This might refer to the classical inflation targeting regime as well as the policy the Federal Reserve (FED) implements. Under the classical policy, the objective of the central bank involves inflation gap and output gap. Inflation gap refers to the difference between the actual inflation and targeted in
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Would women work if the subway system was sufficient?
Güven Sak, PhD
24 January 2012
Lack of a sufficient subway system has a role in the low rate of employment among women. Turkey’s economic agenda is quite poor nowadays. Why? I believe that the shallowness of the agenda is related closely to the lack of a government vision and projects for Turkey’s future. I find it sad that the projects for reconstructing Istanbul are presented as a commitment to Turkey’s future. I find this pathetic. Some claims about manufacturing a domestic automobile seem to be made-up news as they are not grounded on a concrete plan. I believe the recent efforts to intimidate economists who criticize the overt policy mistakes of the central bank and accuse them of lobbying with arguments like “the interest late lobby is on the go” are nothing but biting off more than they can chew. I think these tr
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The five differences between the ministries of education in Turkey and the UK
23 January 2012
I actually wanted to continue writing on the issue of sidewalks as we are buried in snow. The municipal mentality that plows the snow on the roads does not care much about the sidewalks where pedestrians walk. But I will cover this in a later commentary. I am now sure that we have no respect for citizens who want to walk on sidewalks. But does the government respect citizens who want to surf the Internet? Today, I want to share some of my observations as an average Internet user.
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The search for a new monetary policy (1)
Fatih Özatay, PhD
21 January 2012
How can we rearrange the pre-crisis monetary policy to guard financial stability as well as price stability? My recent commentaries about monetary policy concluded on the pressing need for a new institutional regulation. For instance, my last commentary concluded, “We had better return to the inflation targeting regime. Also, it is possible to strengthen this regime in a way that it also safeguards financial stability. To this end, we need to consider options to transfer certain powers of the Banking Regulation and Supervision Agency to the Central Bank of Turkey (CBT).” I also explained why I have reached such conclusion. I want to summarize these neatly. Starting with today, I will talk about “the search for a new monetary policy.” Price stability is the priority This is how the debat
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If violinists can’t tell the difference, how can S&P?
Güven Sak, PhD
21 January 2012
I don’t like reports about the Commission working on a plan B for the possible breakup of the eurozone. That paves the way for unintended consequences. We live in interesting times. Are you following the after-effects of Standard & Poor’s (S&P) downgrade of European countries like France, Italy, Austria and Spain? I do not mean the reaction of the financial market. That was obvious. Risk aversion is always good for dollar assets. No, I mean the reaction of the governments themselves. That was fun to follow. If you ask me, what those countries are entering can most nearly be described as the five stages of grief. They are now in the first stage of denial. Just take a look at the reaction of Victor Ginsburgh, from the Universite Libre de Bruxelles. His commentary was tit
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FED’s recommendations to the CBRT
Fatih Özatay, PhD
20 January 2012
We need to consider options to transfer certain powers of the Banking Regulation and Supervision Agency to the Central Bank. According to a story featured on Bloomberg website on January 6, the Chairman of the Federal Reserve Bank (FED) of St. Louis declared that the FED considered launching an inflation targeting regime. The story also highlights opinions of some economists on his remarks. There is a widespread belief that a publicly disclosed inflation target would be a key step for FED’s transparency policy.
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Ankara’s subway is like Nigeria’s subway
Güven Sak, PhD
20 January 2012
Nigeria and Turkey are in the second group due to the lack of organizational capacity. The Hrant Dink trial has ended. The verdict has proven that, during the last decade, there has been no change to the state in Turkey. That Ankara’s subway is no better than Lagos’ subway, when considering the number of stations, is also closely related to the fact that there has been no structural change to the state. Let me tell you why.
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