The pursuit of transparency (1)
Fatih Özatay, PhD
15 November 2012
Although certain monetary policy models go out of date and are replaced by more fashionable ones, transparency was never abandoned as a principle. Looking at the last fifty years, it is clear that monetary policy practices in market economies have changed radically. For instance, there was a period when the mainstream monetary policy was that central banks declared in advance when and at what rate the liquidity will be increased. Then, circumstances changed; the “monetary control” approach was left and replaced by inflation targeting regime.
[More]
Erdoğan and his capacity to manage the PKK problem
Nihat Ali Özcan, PhD
15 November 2012
The management of the PKK problem by the Erdoğan government is more difficult and costly compared to the early years of the AKP rule. The behavior of the Turkish government is similar to that of other governments struggling with similarly complex problems. This behavior entails biding time and hoping that favorable political and psychological conditions will prevail and demands become more acceptable. Of course, the best solution for the government is to manage the process with minimum costs. However, this strategy has its own limits and risks, especially when the number of actors increases and their uncontrollable behavior breeds uncertainty, or when the credibility of decision makers is low due to their inability to fulfil promises.
[More]
The total value of bounced checks has doubled
Güven Sak, PhD
14 November 2012
Anatolian tradesmen and industrialists feel the economic slowdown the most. We are going through an interesting period. Turkey’s economy has been slowing down in a controlled fashion, and is praised for that. Why? Because as the economy slows down, accumulated risks come under better control. Is it a good thing? It depends on how you look at it. At the national level, the economy goes like clockwork. At the corporate level, however, the cost and the challenges of the slowdown become visible.
[More]
What steps will the Central Bank take next?
Fatih Özatay, PhD
13 November 2012
The only factor that could possibly limit foreign exchange inflows towards Turkey and its peers is the risk of a fiscal cliff in the US. Here is a quote from the Central Bank’s (CB) latest Inflation Report, page 12 (similar statements can be seen in the Monetary Policy Committee Meeting Minutes, Article 15): “a resurge in short term capital inflows may slow down the rebalancing process through rapid credit growth and appreciation pressures on domestic currency. Should such a risk materialize, the CBRT may keep short-term rates at low levels while tightening through macroprudential tools such as reserve requirements. Moreover, the automatic stabilizer nature of the Reserve Option Mechanism will support financial stability.”
[More]
Industrial output growth was no surprise
Fatih Özatay, PhD
10 November 2012
Economic recovery in the fourth quarter is probable; but it appears that the recovery, if any, will start at best in November. At times, when I say “I will address this issue in my next commentary” but an important development takes place, I fail to keep my word. On Thursday I promised to write about the possible exchange rate movements and the response of the Central Bank; but I have to postpone it. Because industrial output figures for September released on Thursday came as a “surprise” for some analysts.
[More]
More female CEOs in Turkey
Güven Sak, PhD
10 November 2012
When education and income barriers are passed, women tend to be more active as employers. What first comes to mind when defining Turkey? I suppose it must be the duality of the country. The uninitiated will struggle to identify the country after traveling to Istanbul then Diyarbakır. The sets of economic capabilities also change radically, becoming less sophisticated as one goes southeast from Istanbul. There are more female CEOs in one part of Turkey while the female labor force participation rate hits its low point in another part. These two halves of the country used to live far apart but have been seeing more of each other through internal migration.
[More]
What’s with the Boğaziçi zombies?
Güven Sak, PhD
09 November 2012
The draft shows us that all has been quiet on the YÖK front since its establishment. Last week Radikal had an eye catching headline “One thousand zombies at Boğaziçi University.” It seems that this referred to students who were un able to pass the English preparation class. There were many of them. One of the banners in the story image asked for conditional pass for the English class. I believe this is a bad idea. In addition, with the new Higher Education Council (YÖK) Draft Law on the table, I think that the issue of the English preparation class is good chance to address the issues into which YÖK, the peak of the bureaucracy in Turkey, should not poke its nose. Let me tell you what I think.
[More]
Obama, Fitch and the value of the lira
Fatih Özatay, PhD
08 November 2012
The investment grade will most certainly put a downwards pressure on exchange rate and an upwards pressure on the current account deficit. At the end of the latest commentary, I asked a question that was hard to answer. It was about the direction to which the exchange rate will head. Soon after came two related developments. First, only a couple of hours after I sent the piece to the paper, Fitch declared that Turkey’s rating was upgraded to investment level, making it easier for us to answer the question. Also, the US election was completed; indicating that one factor that obstructs the answer of the question remained the same.
[More]
How can Turkey buy into the federal Syria idea?
Nihat Ali Özcan, PhD
08 November 2012
The opposition groups in Syria are still in disarray. Since most of the political and military organizations are “fabricated,” there is no prospect for a united political-military front. They have no capacity to carry the “revolution” to the next phase.Moreover, this incapacity is damaging not only the “future of the revolution,” but also the “ideology of democracy and freedom” and its allies. As armed groups commit “war crimes,” both the legitimacy of the struggle and the regional faith in “democracy” are being questioned. Let’s not forget the jihadists who are taking root in the region by systematically using violence which, in civil war, forces everyone to join a group.These concerns are definitely shared by the politicians of the United States and the United Kingdom. They fe
[More]
Let’s urbanize our agricultural policy already
Güven Sak, PhD
06 November 2012
Turkey’s agricultural policy framework concentrates on rural development rather than on the productivity of the sector. The majority of the voters, however, now live in urban areas. Turkey successfully liberalized its economy in the 1980s, followed by a comprehensive structural transformation. It switched from an agricultural economy to an industrial one exporting medium-tech products. This is the general story that I tell when talking about Turkey. But I think there are some points missing. The true story is that, in the 1980s, Turkey liberalized its economy except for the agricultural sector. It appears that the agriculture and livestock sectors have remained as they were.
[More]
