Will the Lira strengthen in 2012?
Fatih Özatay, PhD
07 January 2012
For Mr. Başçı's expectations to prove right, the Fed has to continue the monetary expansion and the European economy has to recover. I learned about the speech the Central Bank (CBT) Governor Erdem Başçı delivered in Bursa after I was requested to state my opinions from by two different newspapers. Then I read an extended review of the speech on the CBT website. Two points Başçı emphasized attracts attention. First, he said, “2012 will be a year in which the Turkish lira is one of the currencies that strengthens the most.” Second, he maintained that the high current account deficit that Turkey has been suffering for the last couple of years stemmed from the abundant and cheap sources of finance (if the summaries were correct of course). He made this point to stress that the argument that o
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Why has Bursa not grown?
Güven Sak, PhD
06 January 2012
We are stuck in mediocrity because Bursa, Gaziantep and Diyarbakir were undersized and Istanbul has grown huge. Do you once in a while avoid the unfruitful and highly political agenda of the county and take a look around you? Please do that. Every time I look around, I start thinking that Turkey will never make it to the twenty-first century. Turkey has a nineteenth century agenda to deal with in the twenty-first century. But it not only has failed to make any progress in solving them, it also faces the risk of missing the twenty-first century. I believe that the question in the title is the primary issue with which Turkey has to deal at this point in time. Have you ever thought that Turkey’s key problem, including the nineteenth century problems with which we are currently struggling, mig
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Lessons learned from ‘Uludere’
Nihat Ali Özcan, PhD
05 January 2012
The approaches and debates regarding the unfortunate Uludere incident are quite educational. Data provided by unmanned aerial vehicles (UAVs) and their transformation to intelligence instantly have made it rather popular in the last decade. Since the military are at less risk thanks to this technology, it provides a great advantage to generals and politicians who abstain from public opinion pressure. However, the system is not flawless. It might aim at the wrong targets, as demonstrated in Afghanistan and Iraq, for example. The most dramatic aspect for Turkey is its being used on its own soil, and there are legal, political, ethical and psychological bitter fruits of fatal errors.
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Why seek adventure?
Fatih Özatay, PhD
05 January 2012
Why not strengthen the inflation targeting regime taking into consideration the current circumstances rather than abandoning it? Table 1 shows the inflation targets, inflation realization and growth rates for years between 2002 and 2011. The table also provides the deviation of growth from potential and of inflation from the target. I assumed that the potential growth rate was 4.7 percent. The examined period can be divided into four sub-periods:
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A memory from 2004-2005
Fatih Özatay, PhD
03 January 2012
Back then, the CBT met several times with the Banking Regulation and Supervision Agency (BRSA) to call it for supporting monetary policy. In this first commentary of the new year, I want to travel back to the 2004-2005 period. Along with the global crisis, the opinion that monetary policy must focus relatively more on financial stability gained ground. Currently, central banks are searching new policy mixtures and academics are conducting various studies at full speed. For example, you come up with thousands of studies conducted in 2011 when you search the keywords “financial stability-monetary policy” at Google academics.
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Euro celebrations fell through
Güven Sak, PhD
03 January 2012
The negative forecast for Italy has played a major role in the emergence of the opinion that the Eurozone might break up. The first banknotes of the European common currency, the Euro, began to circulate on June 1, 2002. The shift to the new currency, in fact, had started in 1999. You might remember, back then all of the countries in the Eurozone used to attach tags that showed the price in both their national currency and Euro. Say you had coffee in a shop in Belgium. You would receive a bill that showed the price in both Belgium franks and in Euro. In 2002, the Euro ceased to be virtual and became tangible. Today, no one in celebrating the tenth anniversary of Euro’s tangible life. Back then, however, everyone had high hopes for the Euro. No one had foreseen that we would end up at this
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A year to hoard cash rather than spending
Güven Sak, PhD
31 December 2011
2012 will be a year to hoard cash rather than to spend or invest. It will be about staying solvent. Since the beginning of the 2008 crisis, Europe’s troubles have been helping Turkey to sustain the unsustainable. The crisis has created a savings surplus in Europe, which is rather useful for Turkey in the short term. Turkey’s healthy banking system was also useful as a rapid output recovery process after the big slump of 2009. Turkey was one of the worst hit and among the fastest to recover during the last couple of years. Approaching 2012, the nature of the European crisis is changing. European governments will soon have to pay the price of mismanagement. Funding rates are increasing and deleveraging has come knocking on the door. That means double jeopardy for Turkey. We are not only goin
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Steps to avoid in 2012
Fatih Özatay, PhD
31 December 2011
Which policy does the rate which the CBT calls the “policy rate” refer to? What is the goal of that alleged policy? There exists a huge uncertainty concerning monetary policy. Inflation rate varies around 10 percent. The Central Bank of Turkey (CBT) argues that after moving around this level for the next couple of months, inflation will decrease sharply and converge to the target by the end of 2012. Thus, the CBT expects a convergence to the 5 percent inflation target “from above.”
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The great game of pool
Güven Sak, PhD
31 December 2011
If you cannot plan your position ahead of time, you open yourself up to the random forces of the table. That appears to be the case for Turkey now. I must have heard it first from Madeleine Albright at a meeting in Ankara few years back. She was answering a question about the famous geo-strategist Zbigniew Brzezinski’s grand chessboard analogy. “I do not think that diplomacy could be visualized as a chessboard,” she said. “To me, it is more of a pool table. You aim at a ball but your move impacts other balls on the table. With every move, all the balls on the pool table could be influenced.” A hefty game of pool is going on in our neighborhood. We in Turkey are not the primary target, but every hit influences us nonetheless. The thrust came from North Africa and traveled up to
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Will the new constitution solve problems?
Güven Sak, PhD
30 December 2011
That consensus is difficult does not necessarily mean that it is impossible. Now, the job is more troublesome since the divisions are more deeply rooted. Today is the last day of 2011. In the previous commentary, I described the problems I expect for 2012. Today, referring to the present picture, let me take a look at the means we have at hand with which to deal with those problems. If you are interested, please read on.
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