Required reserve ratio policy might “throw a curve”
Fatih Özatay, PhD
28 March 2013
If the motivation for the latest MCP decision was proper, so was the decision not to raise reserve requirements. I openly stated on Tuesday my expectation about the Central Bank (CB) Monetary Policy Committee (MPC) decision. I expected that the MPC will moderately increase reserve requirements in the case that the recent developments are read as the start of a new episode of growth and will keep the reserve requirements constant otherwise. I didn’t anticipate any cut in the interest rate corridor or the policy rate. The MPC did not change the reserve requirements, but lowered the upper bound of the interest rate corridor by one percentage points.
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The PKK’s military capacity and the withdrawal process
Nihat Ali Özcan, PhD
28 March 2013
Öcalan declared the first step of the negotiations a ceasefire to be followed by the withdrawal of armed militants from Turkey. Karayılan announced that the organization will follow Öcalan’s instructions and the ceasefire took effect. The public debate regarding the withdrawal process continues.The withdrawal process is multifaceted. It has military, legal, diplomatic, political and public diplomacy dimensions. Here I will focus on the military dimension.According to open sources, the number of PKK militants in Turkey is around 2,700-3,200. The number seasonally changes – a rise in summer, a decline in winter – but it is both in line with the PKK’s current strategy and historically verifiable in light of past military experience. Considering the vast geography where the PKK is act
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Turkey had a chamber of commerce before it had tea
Güven Sak, PhD
26 March 2013
Each province and town in Turkey has a state house, a military headquarters, and a chamber building. Drinking tea all day is an integral part of our tradition. If a foreigner who comes to Turkey makes a list of what he or she remembers, drinking tea is definitely in the top five if not in the top three. We drink tea at every opportunity. We drink it during meetings. We offer it to our guests. We order it immediately when we meet with our friends. We drink it alone for the sheer joy of it. We drink it at every opportunity. Tea is an integral part of our tradition. So are chambers of commerce and industry. In fact, these organizations predate tea in Turkey. I think I started to get to know Turkey better after I met the chamber community. My experiences refute the argument in Turkey that what
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It is dubious whether recovery has started
Fatih Özatay, PhD
23 March 2013
There isn’t yet any strong sign of moderate economic recovery having started in the first quarter I will make a pause on the series about the widening gap between Turkey’s FX liabilities and revenues as March figures for two important indicators were released yesterday: capacity utilization ratio (CUR) and real sector confidence index. Changes in CUR give insights about the changes in industrial output and thus growth performance. And changes in real sector confidence index help us understand the trends in private investments.
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Diyarbakır’s changing skyline
Güven Sak, PhD
23 March 2013
Like the rest of the country, my attention was focused on Diyarbakır for yesterday’s Newroz celebrations. Sırrı Süreyya Önder and Pervin Buldan, both Peace and Democracy Party (BDP) MPs, read the historical message of Abdullah Öcalan, the captive founder of theKurdistan Workers’ Party (PKK), to a festive gathering of tens of thousands. The man who started the Kurdish uprising announced that the era of armed struggle was now over and declared the beginning of a new era of democratic and political struggle. Note that this is the end of a resort to arms, not the end of the Kurdish cause. We are at a crossroads now. How did we come here? First, thanks to the democratization process in Turkey. There are ups and downs to it of course – just look at the recent press freedom issues. Where we are n
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Why did the founders of Gittigidiyor.com switch to the construction sector?
Güven Sak, PhD
22 March 2013
It seems that in Turkey it is impossible to do anything that is not somehow related to or connected with construction. But why? Gittigidiyor.com is the pride of the Turkish Internet history. It will always be remembered as one of the pioneers. Launched in 2001, it was the first online auction and shopping website. In 2011, 93 percent of the company was sold to the American corporation Ebay. The site declared the sales price as $217.5 million, then a historic record for Turkey. Do you know what the founders of Gittigidiyor.com did with the money? According to a recent story in Sabah newspaper, they launched a construction company and bought one previously affiliated with Tekfen. It appears that the Zorlu Group is not an atypical example. When in Turkey, you do as the Turks do, just as when
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Erdoğan’s negotiations with the PKK and the Syrian Kurds
Nihat Ali Özcan, PhD
21 March 2013
The Syrian opposition elected their first prime minister at an Istanbul meeting. The efforts to build an alternative government will continue. They hope that forming such a government will help organize the aid received, reinforce their military power and grant them international legitimacy. The plan is to put military and political pressure on Syrian President Bashar al-Assad and thereby acquire a more powerful position at the negotiation table.The disorganized state of the opposition is still a serious problem. Their plan can work only if they manage to stand united. Two groups are especially prominent: The Islamist Al-Nusra Front, designated by the U.S. as a terrorist organization and the Kurds under the control of the Democratic Union Party (PYD), which has been ostracized b
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The constraints FX open position imposes
Fatih Özatay, PhD
21 March 2013
Due to the FX open position of the economy, rapid increases in exchange rate would disrupt balance sheets and hence lower growth. I will continue with the challenges facing economies that have higher FX liabilities compared to FX debt. This economic disease restricts policy options. For instance, assume that the central bank implements an anti-inflationary policy together with measures that regard the real value of domestic currency in order to maintain the international competitiveness of the economy.
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I understand Nicosia’s point, unlike Ankara’s
Güven Sak, PhD
19 March 2013
I believe that Ankara played to the crowds. I do not understand the meaning of the decision. I want to talk about two decisions made about the banking sector, the first by the Competition Authority of Turkey, based in Ankara, and the second by the government of Southern Cyprus. The Competition Authority of Turkey fined banks for their violation of competition rules. The government of Southern Cyprus, upon the European Union’s demands, decided that depositors would share the cost of the national banking crisis. I believe that Ankara played to the crowds. I do not understand the meaning of the decision. On the other hand, Nicosia made a tough call and I can see why. Let me tell you what I think.
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A hard-to-cure disease
Fatih Özatay, PhD
19 March 2013
High FX open position is an economic disease: the economy is indebted in FX terms. During the last two pieces, I focused on the challenges facing economies whose FX debt is higher than FX assets (that is economies with high FX open position). The latest piece was about the positive and negative effects of real depreciation of the domestic currency, that is, a rise in the exchange rate beyond the difference between domestic and foreign inflation rate. The last one of these is quite interesting as it gives way to a self-feeding upwards pressure on FX open position: domestic currency being valued, especially for a long timeframe, encourages FX borrowings, which in the end increases the FX open position of the economy.
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