What are the Central Bank’s options?
Fatih Özatay, PhD
07 March 2013
With credit growth rate being substantially above the targeted level, the MPC will continue increasing reserve requirements. The Central Bank (CB) targets three variables. Out of these, two are released on a monthly basis and one on a weekly basis. Consumer price index (CPI) inflation and real exchange rate figures for February were released this week. Also, credit figures for the week that ended on February 22nd are available. On the 26th, the press release on the summary of the Monetary Policy Committee’s (MPC) February meeting was issued. I would like to assess the recent developments with reference to the press release in order to identify the options ahead of the CB.
[More]
If energy imports drive the deficit, Turkey’s unemployment rate is actually 35%
Güven Sak, PhD
05 March 2013
Those who insist that the current account deficit would dissolve if Turkey’s energy bill could stop growing should argue that Turkey’s unemployment rate is 35% rather than 10%. There is a widely accepted bulk of modern time superstitions about the Turkish economy. My recent favorite is that Turkey’s dependency on energy imports is the main driver of the current account deficit. Many people defend this argument seriously. At the first instance, when you add the figures up, you too might get that impression, but the reasoning is incorrect, it is rubbish. If you agree with this statement, you might as well argue that the unemployment rate in Turkey is not the official 10%, but 35%. If you insist that it is energy imports that drive the current account deficit, then Turkey’s unemployment rate
[More]
Inflationary dynamics have not changed
Fatih Özatay, PhD
05 March 2013
If the Central Bank intervenes to lower lira’s value as was done in the late 2010 and early 2011, inflation will increase. The same old scene has been playing in consumer price index (CPI) and headline inflation for some time now. In spite of temporary ups and downs in the indices, trends vanish when you extent the analysis over a longer timeframe. Rather they are replaced by floating movements around an average value. Figures for February demonstrate a similar tendency: year-end CPI inflation had a value of 7 percent, higher than December’s 6.2 percent and lower than January’s 7.3 percent. The average that CPI inflation figures have been floating around since 2009 is 7.5 percent.
[More]
What is the problem with Italy?
Güven Sak, PhD
02 March 2013
It was in 2011, and I was talking to a friend in London who had just returned from Davos. My friend pitied the Italian government officials trying to arrange meetings for their prime minister. Nobody wanted to be seen with Silvio Berlusconi. Italians have a love/hate relationship with their former prime minister. Nobody really likes him, but he is more or less accepted as family. His flirty manners and scandals put him in the spotlight of the feminists, but I don’t think the majority of Italians really mind when they live in a country with so many beautiful women and such nice weather. Uncle Silvio is a bit weird and he probably owes you money, but in the Mediterranean, family matters. That seems to be part of Berlusconi’s secret, if you ask me. But Italy needs more than a charm
[More]
The Kaesong Industrial Region is operable, the Jenin Industrial Estate project on hold
Güven Sak, PhD
01 March 2013
North and South Korea were able to settle matters much more quickly than Israel, Palestine, and Turkey were able to find a compromise. If you travel south for about two hours of North Korea's capital of Pyongyang, you will arrive at the Kaesong Industrial Region, before the demilitarized zone. Or, if you travel north from Seoul, you will arrive in Kaesong, right after the demilitarized zone, in aboutc an hour. North Korea and South Korea just hate each other. They occasionally sink each other’s ships or crash each other’s planes. But around 50,000 North Koreans as well as a thousand South Koreans go to the Kaesong Industrial Region every day to work for South Korean companies. The Region, which became operational during Kim Jong-il’s time, is approximately 65 square meters in size.
[More]
Additional information needed on credit figures
Fatih Özatay, PhD
28 February 2013
Credit growth rates vary between the reports of intermediaries, banks and research institutes. Domestic credit growth rate has become an important variable for monitoring the monetary policy alongside the consumer price index (CPI) inflation and real exchange rate. The Central Bank (CB) has been setting targets for all the three, explicitly or implicitly. The inflation target is declared at the beginning of the year, as per the relevant law. Real exchange rate and credit growth rate targets are expressed either in several meetings by the CB governor or in CB reports.
[More]
From counter-insurgency to stability
Nihat Ali Özcan, PhD
28 February 2013
Thirty years have passed and the outlawed Kurdistan Workers’ Party, or the PKK, problem is now in a new phase. The conflict took so long that the world, the region and Turkey have all changed. Recent attacks have divided society and made ethnic and religious identities more visible. They have transformed political and psychological expectations. In the meantime, the government once again reluctantly sat down at the table with the PKK.The process poses serious risks for the AKP. Erdoğan knows these risks and is trying hard to minimize them. Still, his preferred method of “open negotiations” puts him in a difficult position.The most important factor making the management of the process immensely difficult is divided public opinion. Erdoğan not only faces the reaction of the opposi
[More]
4 percent growth target in jeopardy
Fatih Özatay, PhD
26 February 2013
CUR figures for January and February reveal that industrial output might increase to some degree in Q1/2013, after the worst quarter of 2012 with this respect. February figures for two critical variables that inform us on the outlook of the Turkish economy were released last Friday. The first one is the capacity utilization ratio (CUR). In December, seasonally adjusted CUR increased month-on-month, which was read in support of economic recovery. If year-on-year change in the CUR was examined, however, the clear and deepening downwards trend in the ratio would have been identified. There is a close relationship between CUR and year-on-year changes in industrial output. In December, the latter decreased significantly. Yes, we should not take monthly fluctuations seriously. Nevertheless, outp
[More]
How a course can have 155,000 students?
Güven Sak, PhD
26 February 2013
If you cannot tap the potential, someone else will. In the end, selected children of ours can have it made in the shade. Here is one thought left from the year before: can you lecture in a class of 155,000 people? It appears that you can. Last year Harvard and MIT launched an online education platform, edX, to offer free online courses. For the first course on edX, 155,000 people enrolled all from around the world. Young people from Egypt to Mongolia enrolled to attend the lectures of Nobel laureate scientists. The world has been changing rapidly, and it appears that the change will accelerate. Universities have joined the trend. This is an initial trial. I was planning to talk about the online education issue. Then I learned that the programs of the Khan Academy, one of the pioneers of on
[More]
Two perspectives on Turkey
Güven Sak, PhD
23 February 2013
Recently I read two interviews in two different Turkish newspapers. In them, I found two perspectives on Turkey, so far apart yet so complementary. The first interview was with Brazilian football star Alexsandro de Souza at Habertürk, the second at Hürriyet with Lebanon’s current Prime Minister Necip Mikati. Though both are foreigners I will refrain from saying two foreign perspectives. Alex played for our Fenerbahçe football team for the last 8 years and Necip Mikati, after all, is a Levantine. Both interviews delve into the men’s impressions of Turkey. Reading one after the other can be rather perplexing. Ours is a country with a history of serial transformations and the ability to break with its past, not once but many times. Yet, it is a country with constant impediments to c
[More]
