If the euro is important, the game can somehow be managed
Güven Sak, PhD
21 June 2011
The euro is a serious matter; it is not just a currency. It is like the honor of Europe. How would you respond if you were asked, "in whose shoes would you like to be"? I think that no one would ever want to be in the shoes of Yorgo Papandreou. He became the Prime Minister of Greece in the midst of the crisis and has had to undertake one of the most critical decisions for the country. There are two ways ahead for Greece: it will either abandon the euro and go its own way, or focus on austerity measures tailored to protect the euro. If he takes the second path, it will torture the Greek people and lose him votes. But what if he follows the first path? Will he earn votes if he decides not to protect the honor of Europe? I do not think so. Let me tell you why.
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Committee on Financial Stability
Fatih Özatay, PhD
21 June 2011
Although the Financial Stability Committee seems to be a good idea in terms of coordination, it turns out to be the opposite when you think through.
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Some observations on the academic life -3
Fatih Özatay, PhD
18 June 2011
Under normal conditions, the number of courses one lecturer teaches in one academic year must not be more than four in research universities. There is a correlation between the problems I addressed in the last two Saturdays and the number of lectures one lecturer teaches in a week. In research-oriented universities, lecturers teach four courses in average in an academic year. This can be three, five and even six courses depending on the research performance of the faculty member and sometimes on the conditions.
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Turkey not a model, but a source of inspiration for change
Güven Sak, PhD
18 June 2011
There are two types of countries in the Middle East, the ones that require demonstrations in their Tahrir Squares to initiate change and the ones that can use the ballot box for the same purpose. Turkey belongs to the second group. While Turkey belongs to the second group, Egypt, on the other hand, has invented the Tahrir Square model for change in our region. And I believe that Turkey does have something to offer to Egypt, not as a fully fledged model for change, but as a source for inspiration. If a country's experience is considered as the collection of past policy mistakes, Turkey has a multitude of experiences to share in this transformation business. We made a myriad of policy mistakes in the last three decades. Turkish transformation did not start in 2002. The ballot box
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The Twist has ended
Güven Sak, PhD
17 June 2011
It is evident that raising reserve requirements do not push up the costs for banks. It is time to develop a new theory. Every dance ends. This is how I respond to those who ask me what I think about the unusual monetary policy of the Central Bank of Turkey (CBT). Recently in Washington, a friend at the heart of the international financial community asked me, "Do you still remember how to dance the Twist?" The subject of the conversation of the unusual monetary policy framework the CBT initiated in the late 2010. At first, I was like, "What are you talking about?" He said, "The Twist is an outdated dance from the 1960s. In my opinion, your Central Bank still does the Twist." The CBT tries to fake the markets with some attractions. This made sense yesterday. But if people start to think "thi
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There are lessons to learn from what Portugal is called for
Fatih Özatay, PhD
16 June 2011
We have to learn lessons from what the IMF and the European Union calls Portugal for as prerequisite of the US$ 116 billion bailout plan. It is doubtless that the economic program that was launched after the 2001 crisis and was pursued roughly until the eruption of the global crisis with certain modifications brought economic stability in Turkey. This way, public debt, budget deficits, interest rates and inflation was reduced significantly. One of the key pillars of that program was the steps taken to change the institutional structure that made possible the implementation of undisciplined economic policies observed in the large part of 1980s and 1990s. Institutional reforms are insufficient Of course the institutional structure was not altered completely; but considerable progress was
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When will things (hopefully) get better in Syria?
Nihat Ali Özcan, PhD
15 June 2011
It was about five years ago, I guess, when we visited Syria with a friend of mine who was getting ready to make an investment in the country. I remember our long conversations during which I raised some of my concerns about the country's political situation. Anyway... My friend took the risk and made quite good money until now.
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What is the usual monetary policy?
Fatih Özatay, PhD
14 June 2011
What if the BRSA does not step in? If so, the CBT will have to settle with one intermediate target, that is the inflation target. My previous commentary on the possible monetary policy after the elections turned out to be so long that I could not dig into the main issue, the monetary policy. I said: "...Fiscal policy would have been tightened. Measures to slowdown the credit expansion would have been implemented in collaboration with the Bank Regulation and Supervision Agency (BRSA). With these two critical steps, the monetary policy that has been implemented since the second half of 2010 would have been replaced with a more usual one. Great minds think alike; I believe that these steps will be taken." Credit expansion can be limited I have to specify the concept of 'usual monetary poli
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Political polarization becomes structural
Güven Sak, PhD
14 June 2011
Unfortunately, the curtains did not close on the polarized state of politics with the 2011 elections. The elections were held safely and soundly. The Justice and Development Party (AKP) raised its votes to 50 percent and came to power alone for the third time. The Republican People's Party (CHP) grew stronger as the main opposition party and raised its number of votes in 46 provinces. The Nationalist Movement Party (MHP) entered parliament despite all speculations. The Peace and Democracy Party (BDP) proved that it is the main representative of Kurdish politics. The votes of other right-wing parties decreased to 5 percent, from 13 percent in the 2007 elections. Votes were to a large extent consolidated. It became clearer why the election system has not altered. The votes were consolidated
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Possible economic policy after the elections
Fatih Özatay, PhD
13 June 2011
FED's policy saves Turkey time to solve the accumulated problems. I was assigned the task of seeking an answer to the question "how the monetary policy will be shaped in the context of the outlook the election results created?" The analysis must be conducted on two scales: short term and long term. Let me start with the short term.
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