If the CBT had done the statement on Tuesday right after the debates had emerged, it would strengthen its prestige.

I had omitted the last two paragraphs of my commentary on Tuesday to use it in today's commentary due to constraints about space. My commentary on Tuesday ended as follows: "Now it is time to examine the declarations of the CBT about the steps taken to discourage short term capital inflows and the dissuasiveness of the decisions. I will deal with this in the next commentary..." I was talking about the Central Bank of Turkey (CBT). And the part I had to omit (in brief): "...The rest of the decisions were aimed at enabling a healthier method of finance for the current account deficit that currently stands at high levels. The Bank has initiated a number of measures supposed to discourage short term capital inflows. For instance, it cut down to low levels the interest rate imposed on the deposits banks sell to the CBT with overnight maturity. Nevertheless, contradictory statements were made as to whether this second aim was fulfilled.

The Bank declared that in the recent period US$ 10 billion of hot money outflow accompanied by an inflow of longer-term capital at the same amount was observed. The debate stems from the fact that figures announced to the public does not reflect his picture. It would be wise if the CBT announces rough figures (the exact number cannot be calculated) rather than talking with obscure words."

Finally on Tuesday the CBT has made the expected statement. According to this, transactions carried out by foreigner particularly in the monetary market has been increasing since November 12, 2010. I do not want to deal with the numerical details; you can find sufficient information on yesterday's daily papers. The point I want to stress is a different and much more important one. As also expressed in the statement, the transactions carried out by foreign investors in the monetary market are not observable in the balance of payments statistics. The mentioned transactions are not recorded in the data for "Non-residents' Holdings of Stocks and Government Domestic Debt Securities" announced weekly by the CBT, either. But as the statement tells us, the mentioned data can be accessed in the "Interactive Weekly Bulletin" issued by the Bank Regulation and Supervision Agency. 

The CBT was late in making a statement
But do we have to know these technical details? Would the CBT have lost anything if the CBT had done the statement on Tuesday right after or even before the debates had emerged? It is evident that not only it would not lose anything; it also would strengthen its reputation. This point is of critical importance:

A central bank might have an outstanding personnel profile. Proper economic decisions can be made using super models. These are all okay. But if that central bank fails to explain why the decision was made in the first place and to inform the public sufficiently about the impact of the decisions, the perfectly proper decision made by outstanding experts cannot work for the purpose. What is more, the debates stemming from lack of information on the decisions damage the prestige and the reputation of the central bank.

Is it really difficult to make a statement to the public combining some tables and figures with a couple of sentences?

This commentary was published in Radikal daily on 16.03.2011