Is it good to have a maverick central bank?
Güven Sak, PhD
06 August 2011
No, it is not. If you are a normal market participant and you feel left out in deciphering the meaning behind the recent actions of your central bank, obviously, the central bank is not doing its job properly. Either the bank has difficulty in formulating and conveying its message or there is no message to convey. Either way, there is an apparent disconnection. That is what we have in Turkey, for now. We have a maverick Central Bank speaking in a language unknown to market participants. That is bad by definition. A central bank that has not taught its medium of communication to its customers, i.e. financial market participants, at the outset is a bad central bank. Let me start from here: We have a bad central bank in Turkey.
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Turkey has budgetary problems
Güven Sak, PhD
05 August 2011
Countries that have control of their budgets can stem the current while those that fail to control their budgets go adrift. You cannot treat a disease you cannot diagnose. Turkey has a public finance problem. It has budgetary problems. That yesterday's indicators do not say so does not mean that there is no problem. It is necessary to assess the circumstances cautiously from a new perspective. Turkey gained a great deal after the 2001 crisis. Now, the risk of losing those gains grows with each day. At least, this is what I think. Let me tell you why.
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Shadow of the Balkans in the Terrorist Attacks in Norway
Erhan Türbedar, PhD
05 August 2011
Anders Behring Breivik who painted Norway in blood with twin attacks has some remarkable views about the Balkans in his "manifesto of terror" posted on the Internet. Breivik says that he has taken his action upon the NATO bombing campaign of Serbia in 1999 and notes that the bombing deprived Serbs of their right to stop Islam on their territories. Meanwhile, Radovan Karadzic who is now standing trial for the crimes he committed during the Bosnian war is an honorable Christian who fought against Islam, according to Breivik. His views expressed in the manifesto indicate that among the factors which pushed him to a perversion such as carrying out an act of terrorism were also the events in the Balkans about which he obviously knew very little.
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Question mark
Fatih Özatay, PhD
04 August 2011
The Monetary Policy Board might decide to narrow the interest rate corridor in its extraordinary meeting today. My book "Financial Crisis and Turkey" was published in December 2009 (Doğan Kitap). The fourth chapter of the book is on the global crisis. It is titled "The Global Crisis: 2007-(?). The title has a question mark since the crisis had not ended by December 2009 and it was not certain when it will end. In April 2011, the third edition of the book was published. Though I added a new chapter and revised the other chapters in this edition, I did not change the title of the fourth chapter. The end date of the global crisis is still denominated with a question mark.
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Do you think Erdoğan is happy with the mass resignation of the generals?
Nihat Ali Özcan, PhD
04 August 2011
There are two essential political actors who managed the period that has ended up with the resignations of the generals. First is President Abdullah Gül, and second is Prime Minister Recep Tayyip Erdoğan. Although everyone interprets what is going on, Erdoğan has not commented on the issue yet. One should not be deceived by those celebrating the so-called "victory of the government." On the government's side, those who predictably have spoken on Erdoğan's behalf are quite cautious so far. It does not seem like they enjoy "a historic victory against the army." It is undeniable that Erdoğan's "sourness" is behind this extreme caution. In order to fully comprehend it, we have to focus on some issues.
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Everyone must pay attention to what they say or write
Fatih Özatay, PhD
02 August 2011
It will be wise if everyone paid attention to what they say or write, particularly in periods of high economic uncertainty. We are used to assessing the public debt as a ratio to the national income. This is how economics textbooks, academic journals and the press approach the issue. To join the Eurozone, for instance, the ratio of public debt to national income must be below a certain threshold. Yet, this threshold does no longer have a meaning; this is not to the interest of this commentary.
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How will the exchange rate adjustment increase exports?
Güven Sak, PhD
02 August 2011
In the end, the depreciation of the TL will be beneficial to low-tech and labor-intensive sectors. The automatic thermostat system that will cool down the economy is still active. The Turkish lira (TL) has depreciated by approximately 20 percent against foreign currencies (FX) and the movement is continuing. Theoretically, all goods produced in Turkey have become 20 percent cheaper in comparison to beginning of the year. We have listened for years about how useful this would be. Now is the testing time. Will the exchange rate adjustment increase exports as argued? Which sectors will benefit from this movement? Will the outcomes be fortunate for all of us? To be honest, I do not think so. I believe that a competitiveness strategy based on the depreciation of the TL will not pave Turkey's w
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What does crisis mean?
Fatih Özatay, PhD
30 July 2011
Existing vulnerabilities are not as strong to trigger a domestic crisis unless unusual steps are taken in the field of economic policy. What does the word "crisis" imply? Monetary crisis implies the steep jump in the exchange rate and the collapse of the exchange rate regime due to a speculative attack increasing the foreign exchange (FX) demand. This movement is accompanied with sharp rises in interest rate. Financial crisis on the other hand refers to an earthquake in the financial sector, in which some financial institutions bankrupt and the rest suffer severe evaporation in capital. The process generally involves withdrawal of huge amounts of deposits from banks. Following these developments, the economy starts to shrink rapidly and unemployment rate shows an upward trend.
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Lifting barriers is good news anyway
Güven Sak, PhD
30 July 2011
In Cyprus, there is a historical green line between the north and the south separating the two ethnic entities. People can pass through, but goods from the north can not. Turkish Cypriots from the north are allowed to work in the south, but they have difficulty in selling their products. That was one big reason why the regional disparity became structural on the island. Years ago, I remember reading an early draft of a World Bank report wondering why the northern part of the island was only trading with Turkey. It was and still is because of the embargo regime on the island. There are two embargo regimes in the region: One is in Israel against the Palestinians; the second is in Cyprus against the Turkish Cypriots. Both are bad.
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Will the recent adjustments pave the way for foreign investments?
Güven Sak, PhD
29 July 2011
Turkey so far has grown rapidly "with the blessing of God" and now is slowing down automatically. On Tuesday, I said, "There is no need to worry, but it is useful to be concerned." Taking departure from that point, let's start to examine the potential outcomes of the ongoing exchange rate adjustment. Let today's topic be this: Will the exchange rate adjustment pave the way for foreign investments? Will Turkey become an important area of investment for international value chains when the adjustment is completed? Will the fate of Turkey change? To be honest, I have doubts. Let's try to figure out how the investment climate of a turbulent country will be.
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