Why were we affected this severely?
Fatih Özatay, PhD
08 November 2009
Table 1 gives the difference between estimated 2009 growth rates and average growth rate for the last four decades for certain countries. Those countries were not selected randomly; in the first group are developing G-20 countries. In addition, three large Central and East European economies are also included. The last raw gives the average of the figures. 2009 growth estimates were taken from World Economic Outlook report o the IMF.
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We should not curse inflation targeting regime
Fatih Özatay, PhD
05 November 2009
On Tuesday October inflation rate was announced; we learn that the pace of increase in consumer prices is 5 percent. I have not been talking about inflation for a while. Of course the main reason is the serious damage caused in Turkey's economy by the global crisis. It was more interesting to seek a solution for the question what can be done to tackle the rise in unemployment and economic contraction.
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100 flowers 100 theories
Fatih Özatay, PhD
02 November 2009
It is apparent that the economics is going through tough days. The problem is not only that there were few economists that foreseen the global crisis. Of course this alone is quite important. After all, we are talking about a discipline that falls short in estimating the future. But there are also other problems.
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When will the early elections be held?
Fatih Özatay, PhD
01 November 2009
News that early elections can be called started to come to the forefront. What can be the date of early elections? Of course this question has various dimensions, but I will only address the economic dimension. But it is hard to answer.
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That fund problem
Fatih Özatay, PhD
29 October 2009
You have read several times at this column that Turkey's response to the crisis is 'too late, insufficient and partially at the wrong direction'. I tried to touch upon the possible reasons for this phenomenon. Today, I would like to elaborate on one of them. You aim to implement a fiscal policy to stimulate domestic demand. Of course there are several ways to do this. But those first coming to mind are: increasing unemployment benefits, distributing additional bonuses to the retired, launching trainings to improve the skills of labor force, accelerating infrastructure investments and or cutting down taxes... Of course it is easy to list the measure; the hardest part is to create budget means necessary to realize those. In the end, budget deficit increases as you implement one or more of th
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Important problem of central banks
Fatih Özatay, PhD
26 October 2009
For a while, I have been touching upon an issue that is big of a problem for the implementation of monetary policy. The fundamental question was: Should monetary policy be used to prevent the asset price bubbles that played a major role in the emergence of the crisis? The commentary on this issue was published on last Thursday. At the end of that commentary I asked questions one after another: So, what can central banks do in the event of a credit expansion? A problem arises just at the beginning: At what pace credit expansion is rapid? What if a credit expansion we consider rapid in fact does pose any risk for the financial system? Assume that you overcome this challenge and decided that the things are not on track in the credit market? Then what would you do?
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Repercussions of the crisis
Fatih Özatay, PhD
25 October 2009
September 2008, with the bankruptcy of Lehman Brothers, is accepted as the date of the emergence of the crisis. Today, I would like to analyze the development of the crisis in Turkey starting from a bit earlier than that date. Here, I will examine the figures for almost one and a half year.
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What pace drives us to disaster?
Fatih Özatay, PhD
22 October 2009
I will continue with the issue I started to discuss on Monday. Today's question is: Why does rapid credit expansion has the potential to pose the risk of a significant monetary policy problem? In a study published in 1996, J. Frankel and A. Rose analyses monetary crises in developing countries for the period between 1971 and 1992. One common characteristic for a hundred countries is that domestic credit volume expands rapidly. A new study in this topic is conducted by Barajas et al. They point out that more than half of the banking crises they analyzed were preceded by a period of rapid credit expansion.
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Rapid credit expansion and bubbles
Fatih Özatay, PhD
19 October 2009
The following lines are quoted from Central Bank's announcement from 2004 titled 'August Inflation, Outlook and CBRT Interest Rates: "It should be kept in mind that what Turkey needs is not high but unbalanced growth but sustainable growth in harmony with the implemented policies. To ensure this, it is necessary to implement selective measures such as supply-oriented limitations which will minimize credit expansion to reasonable levels (if detected to contradict with the goal of securing a healthier financial sector) and will also be in line with international financial sector norms."
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Rents cannot be indexed to PPI
Fatih Özatay, PhD
18 October 2009
I enumerated a lot of topics to handle, but unfortunately I cannot begin dealing with them today. The reason is the will 'to be useful' for the country. The Parliament is negotiating the 'Code of Obligations'. This is a highly important draft. Yesterday, Radikal daily gave information on some articles of the law draft. The section also gave separately a column on the articles regulating renter- house owner relations. As one of the articles stipulate, rents can be increased at most by the rate of increase in producer price index (PPI). Oh no! New price indices are being published since 2003. Before that, consumer price index (CPI) and wholesale price index were calculated. Now, CPI and PPI are calculated.
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