This is way too much
Fatih Özatay, PhD
29 December 2011
Why did the CBT choose to cut the rate at fist and double almost double the rate and initiate FX selling auctions two months later? On Tuesday I reiterated my opinion that the headline of the domestic economic policy in 2011 was the new monetary policy of the Central Bank of Turkey (CBT). On the very same day, the CBT shared with the public the monetary policy framework decided for 2012, as it has been doing since 2002. The framework does not differ much from the one that the Bank has implemented since August 2011. Today, I would like to address an unfortunate controversy in the report the Bank released. This controversy successfully summarizes why the monetary policy implemented throughout 2011 was extremely complex and confusing.
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Oil, the Kurds and the future of Iraq
Nihat Ali Özcan, PhD
29 December 2011
The U.S. has withdrawn its troops from Iraq. While the last units were leaving Iraq, an important agreement was being signed in the Kurdish region. The Kurdish government has signed an agreement with global giant Exxon Mobil for the development of oil and natural gas resources in the region, despite Baghdad’s objection.
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Are you ready for an exhausting year?
Güven Sak, PhD
27 December 2011
It seems 2012 will be a year dominated by political debates and lingering economic reforms; one we will look forward to having finished. Am I getting old? I expect 2012 to be more exhausting than 2011. It seems we will waste all of our energy once again and our actions will not bear fruit. It seems 2012 will be a year dominated by political debates and lingering economic reforms; one we will look forward to having finished. We are on the eve of a year during which huge successes will be less likely and our horizon will shorten. This is what I think. I hope I am way out in left field. Let me first state my main observation: 2012 will be a year during which preservation will be more important than advancement. Let me tell you why. Maybe I’m wrong.
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Lessons from 2011
Fatih Özatay, PhD
27 December 2011
Central banks can implement an inflation targeting regime that also safeguards financial stability using old policy tools and the old policy framework. 2011 was a very interesting year. The headline was the new monetary policy of the Central Bank of Turkey (CBT). This attempt was debated widely and assessed vastly by many columnists, including myself. In these last days of 2011, I want to assess the new monetary policy of the CBT once again, but with a different perspective this time.
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North vs. South Korea - Eastern vs. Western Turkey?
26 December 2011
When I heard about the death knell of North Korean leader Kim Jong, it took me a second to even remember that there was a country named North Korea. 25 million people apparently live in this country. We in Turkey are naturally interested in South Korea, located in the southern part of the Korean Peninsula with a population of 49 million people. We admire that country’s economic performance over the past few decades and compare it to that of Turkey.
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There is room for fiscal expansion if necessary
Fatih Özatay, PhD
24 December 2011
Countries that have a low public debt ratio have a larger room to react against economic contraction. The Medium Term Program, the OECD and the IMF’s estimated the Turkish growth for 2012 at 4 percent, 3 percent and 2 percent, respectively. A sharp drop in growth rate is expected for two reasons: First, almost half of Turkey’s exports go to Europe, whose troubles imply a fall in imports from Turkey. Second, European banks are expected to lower credit supply substantially which means that it will be more difficult for Turkey to access foreign funds. The balance of payments figures for the last couple of months revealed this, as well.
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Why Turkey is lagging
Güven Sak, PhD
24 December 2011
Turkey is a country of policy failures, making the country a useful case study for our neighbors these days. Turkey is lagging behind? Sounds perplexing, doesn’t it? Especially when one considers that Turkey’s growth in 2011 has surpassed even that of China. That is when I started hearing questions like “Is Turkey an economic exception amid the global crisis?” The true economic character of a country, however, can only be portrayed by its experience, and Turkey’s is there to analyze in numbers. The figures indicate that relative to the GDP per capita of the United States, Turkey performs badly when compared to Greece, Spain and Portugal. We only appear invincible because we no longer lag as badly behind Southern Europe as we used to. The culprit behind this misperception, a new
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Turkey’s justice deficit
Güven Sak, PhD
23 December 2011
The courts do not function effectively. This is why Turkey fails to achieve innovation-driven growth. It created a great uproar during the 2001 crisis: The possibility of selling to a mediator the right to collect uncollectible debts, as is done abroad. A banker friend of mine said, “This system cannot work in Turkey. Here, only the creditor can collect the credit.” It was then that I realized that the securitization that has been pushing American banks to bankruptcy is difficult in Turkey. In other words, it is Turkey’s justice deficit that has saved us. Are you aware that Turkey’s current account deficit is accompanied by a justice deficit? We know how to set rules, but we fail to implement them. Why? Are we lacking sanctions? No, there is a sanction for infringing on almost any rule. Th
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Pessimistic speculations about China
Fatih Özatay, PhD
22 December 2011
In a country like China which has such a low household consumption rate, who is supposed to buy the goods and services to be produced with the huge capacity developed via rapidly growing investments? While everyone is fixated on Europe, some experts are persistently warning that things are not going on track in China lately. I read four commentaries in this direction in the last three weeks. The one I will refer to today was highlighted on Bloomberg website on December 19. The author stresses that the actual credit risks of Chinese banks are higher than declared. One of the main sources of the risks goes as follows: local governments initiated large construction investments in order to minimize the impact of the global crisis. Though those investments are financed someway, the risk is afte
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Changing character of struggle with the PKK
Nihat Ali Özcan, PhD
22 December 2011
You might know the famous metaphor Mao used for clarifying the relationship between guerillas and people. The metaphor is based on the relationship between fish and the sea. The sea symbolizes people and the fish symbolize armed militants. If the sea doesn’t have proper conditions, then fish don’t have a chance to live.
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