Exchange rate and headline inflation
Fatih Özatay, PhD
06 November 2012
The direction to which the headline inflation will heads relates basically to that exchange rate will head. Inflation statistics for October were no surprise: consumer price inflation (CPI) as well as the headline inflation that excludes the price changes for certain goods and services (the l indicator) decreased, with annual CPI at 7.8 percent and headline inflation at 6.1 percent currently. The downturn in headline inflation is particularly remarkable: it decreased by 2.1 percentage points since April.
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So Ali Ağaoğlu is Turkey’s Zuckerberg, eh?
05 November 2012
A couple of months ago I asked why none of the Mark Zuckerbergs of the world lived in Turkey [1], but I have lately realized that Turkey does have a class of young [2] dollar-billionaire entrepreneurs. So I would like to say a couple of things about Ali Ağaoğlu’s entrepreneurship. The contractor and self proclaimed “architect of life" recently has become a social phenomenon through his advertisement campaigns. I think his story gives us a better understanding of Turkey.
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Spending on durables qualifies as consumption?
Fatih Özatay, PhD
03 November 2012
Some of the common macroeconomic models take the expenditure on durables as investment expenditures. Does the spending on durable goods such as refrigerators, washing machines and automobiles qualify as consumption or investment expenditures? The former, according to international standards; specifically categorized as “consumption of durables.”
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Turkey’s economic growth stuck between Hamas and PKK?
Güven Sak, PhD
03 November 2012
Turkey could not enact an effective legal framework to combat terrorist financing. I was at a meeting with a group of officials from the European Investment Bank (EIB) recently. The EIB is more and more interested in supporting infrastructure projects in Turkey. I told them about how Turkey’s inadequate transportation and logistics infrastructure prevent our inland regions from joining the European Customs Union, thus foregoing all the benefits of connectivity that comes with it. We went over the relevant sectors for the European integration process. Everything was going well until a little caveat at the end. “Of course,” I was told, “if Turkish membership of the Financial Action Task Force (FATF) is suspended in February 2013, the EIB will not be able to extend any more loans a
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So this is the free floating exchange rate regime, huh?
Güven Sak, PhD
02 November 2012
Under the floating exchange rate regime, the exchange rate is expected to float. If it does not, the banking system that cannot sense risk accumulates risks. The world economy is going through an unprecedented period. Surrounded by events with which we are unfamiliar, central banks too are acting in new ways. The Central Bank of Turkey (CBT) has been acting outside of the box for some time now. Most recently, it has introduced the Reserve Option Mechanism (ROM), which has brought remarkable stability in foreign exchange (FX) markets. With ROM, a significant proportion of the transactions in FX markets has been excluded from the price setting process. The first question to ask here is: is Turkey still employing the free-floating exchange rate regime? Second, would this policy have a side e
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Indicators of dual character
Fatih Özatay, PhD
01 November 2012
The growth rate in the third quarter will most likely be below the unpleasing growth rate of the first half of the year. Foreign trade statistics for September were announced yesterday. Since December 2011, non-energy and non-gold imports have been decreasing year-on-year. The reason is quite obvious: growth rate has been significantly low and thus import requirement has been decreasing. The picture did not change in September, either: non-gold and non-energy exports decreased by 3.6 percent. The only difference is that the rate of decrease was smaller compared to previous months.
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How does the PKK act like a state in Syria?
Nihat Ali Özcan, PhD
01 November 2012
U.N. special envoy Lakhdar Brahimi called for a truce in Syria during Eid al-Adha, or the Feast of the Sacrifice. His call was received with prejudice by all sides, who put forward their own preconditions. Once again, the political uncertainty and chaotic structure in Syria was demonstrated and, as the truce failed, we witnessed the brutality of war.The most important development during the “truce” was the targeting of Kurds in Aleppo, first by President Bashar al-Assad’s forces and then by certain elements of the Free Syrian Army. The armed militia of the Democratic Union Party (PYD), the Kurdistan Workers’ Party’s (PKK) front organization in Syria, responded to this attack in kind. Both sides suffered casualties and took civilian hostages. It won’t be a surprise if accusations
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October was not different
Fatih Özatay, PhD
30 October 2012
I don’t see any sign of a revival in industrial output in October compared to the third quarter. Capacity utilization ratio (CUR) in industrial sector for October was announced before the Bairam and the Republic Day. Probably because of the festive atmosphere, I came across positive assessments on the CUR figures, based on month-on-month comparison of seasonally adjusted data. Indeed, CUR ratio increased from 72.8 percent in September to 73.1 percent in October. Yet, due to the festive mood, the assessments overlooked one detail: the CUR for October was below the average CURs for the first and the second quarter, during which the economy grew at a rate below its potential (Table 1). If we are to look for a reason other than the festive mood surrounding the country, we can say that
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Political polarization is bad for the economy
Güven Sak, PhD
30 October 2012
I believe that political polarization has been blocking our way and reducing our luck. The US has the same problem.
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Reform fatigue in Turkey
Güven Sak, PhD
27 October 2012
I was at the Prague Enlargement Dialogue meeting last week, where I was asked whether the prolonged accession process had led to reform fatigue in Turkey. Now, our candidacy started seven years ago and we were pretty tired of it by the fifth. But at the meeting I still said it hadn’t fatigued us, simply because you can’t be tired of reform if you stopped trying years ago. At some point in 2007, we simply stopped playing the game.This might be the result of the Sarkozy-Merkel effect. Being told every day that you are not good enough might just have consequences. Our politicians now tell us a story of sour grapes. Never mind that we wanted to get into the EU, now that we can’t, we’re told that it is a bad idea anyways. Lousy politicians make for bad solutions. Turks need to learn
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