The Central Bank’s dilemma with a different perspective
Fatih Özatay, PhD
05 February 2011
After the latest decisions of the Central Bank of Turkey (CBT) mixed fund costs were calculated several times. These are not meaningful in regular countries.' Imagine a bank that has a total 100 TL of funds (liabilities) all of which is in form of deposits and has one year maturity. If required reserve ratio of 5 percent and the bank uses the deposits only in form of extending credits, it has to deposit 5 percent to the CBT an extend credits with the remaining 95 TL.
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What else could the Central Bank do?
Güven Sak, PhD
04 February 2011
It is yet too early to talk about the other dimension of the issue; that is, whether the credit expansion has been halted. If the objective is to be met, the signals of a slowdown in the credit expansion must become visible soon.
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How to make a pass?
Fatih Özatay, PhD
03 February 2011
The political authority must introduce measures discouraging short term capital inflows. What was the main problem of the currently implemented monetary policy? The problem was that it aimed to reduce the volume of funds that banks can extend as credits in order to limit the rapid credit expansion on the one hand, and transferred funds with weekly maturity to banks in order to keep the policy rate around the targeted level.
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Doing much, talking less
Güven Sak, PhD
01 February 2011
The skills China demonstrates in managing its growth process are impressive. On Thursday, the Year of Rabbit will begin in the Chinese horoscope. On the eve of a new year, would you like to compare how Turkey and China look from an objective point of view? I do not know why, but I see - or hear, let us say - two different political styles. On the one hand is China, which accomplishes ten tasks, but talks casually about just one of them. On the other hand is Turkey, which pretends to have accomplished one task reluctantly, but then speaks in a tone as if tens tasks have been completed. This is surprising. What is the underlying cause of this? If you wonder, please read on.
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Since there is no one to pass the ball at...
Fatih Özatay, PhD
01 February 2011
'Should the BRSA step in, the contradiction would be eased. To completely eradicate the contradiction, political authority must also get involved.' 'The routine-breaking' monetary policy have brought about many article topics. In my last year in the Central Bank of Turkey (CBT) I started to become quite bored. There was no motion. Inflation was no more a problem, targets were being met. Moreover, Turkey grew at a rate above the long-term average. The only potential source of motion was the potential steps to be taken to reduce current account deficit.
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The Central Bank’s actions might work in the adverse direction
Fatih Özatay, PhD
29 January 2011
'The BRSA must step in. Otherwise might appear the risk that the steps by the CB not only proves ineffective but also works in the adverse direction.' I am getting quite board of writing on the Central Bank of Turkey's (CBT) policies. I have already announced that I have submitted the textbook I have been working on for long to the publisher. Since the book is on monetary economics, I referred to the CBT several times throughout the book. For instance to form the index of the book, I searched for the abbreviation with boredom. It was the deadline and I had to send the book to the publishers immediately. And the search program I was using stopped responding quite frequently. I was quite bored of seeing the abbreviation everywhere. What is more, the new monetary policy framework was announce
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The Turkish Commercial Code would not have been passed without the alliance of Erdoğan, Kılıçdaroğlu and Bahçeli.
Güven Sak, PhD
28 January 2011
The Parliament has fulfilled its duty, now the administration is being watched closely. Turkey's agenda should be composed of unemployment and economic performance. Turkey is an interesting country. Do you know the Chinese curse, "May you live in interesting times"? The case here in Turkey is just the same. Just when you are thinking that nothing will happen until the end of the elections and that no reforms will be initiated until 2015, a step in the right direction comes. Thank God not all surprises are bad. The nice surprise of the recent period has been the amendment of the Turkish Commercial Code (TCC). We should be thankful for this. With this amendment the path for change in the corporate sector has been paved. Turkey still needs some time to design star sectors, but the way to iden
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What does the CBT do?
Fatih Özatay, PhD
27 January 2011
The CBT has not yet introduced required reserves for weekly borrowing from the CBT. The Central Bank of Turkey (CBT) employs inflation targeting regime to enable price stability. It has two targets: to ensure that the inflation rate stands close to the target and that production level converges to the potential. On the basis of the characteristics of the economy (the factors that affect the inflation rate and the level of production) and the targets stated above give a policy rate response equation is derived. Interest rate responds to the difference between actual and potential production level, the real value of domestic currency, foreign real interest rate and shocks affecting supply and demand.
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Who will make the decision? The MPC or the General Assembly?
Fatih Özatay, PhD
25 January 2011
Monetary policy is founded on two pillars. Interest rate decisions are made by the MPC, required reserve ratio is set by the General Assembly. Yesterday the Central Bank of Turkey (CBT) has announced the decision on the required reserve ratio. As was also stated before, the ratio was raised for the short term liabilities of banks and kept for the long term liabilities.
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Sales of the iPhone increase the current account deficit of the US
Güven Sak, PhD
25 January 2011
Then, in this milieu attempting to manufacture a Turkish automobile will not remedy but will even elevate current account deficits. The Turkish Prime Minister recently spoke at a TUSIAD (Turkish Industrialists' and Businessmen's Association) meeting. He called on the industrialists to manufacture a Turkish automobile. We all loved the idea; it sounded great. But when you sit down and think it through, things are not as they seem. If you design a Turkish brand, the current account might not decrease but increase, for instance. Then, deal with the economic columnists of certain media circles who do not get economics, if you can. They will immediately label those with critical opinions traitors and you will have nothing to do but get prepared for the trouble. On what is my argument based? It
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