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    Is the worst part over? (2)
    Fatih Özatay, PhD 02 August 2012
    For long, Germany has been opposing to ECB’s monetization for purchasing securities of troubled countries. Following the positive reaction of the market’s to European Central Bank (ECB) president Draghi’s comments, I started to seek an answer to the question “is the worst part over?” During Tuesday’s commentary, I discussed the underlying reasons for the positive response. Now it’s time to discuss why there is a risk that the positive mood of the markets might be temporary. [More]
    Is the worst part over?
    Fatih Özatay, PhD 31 July 2012
    With the high budget deficit and public debt, the perception that the existing fiscal policies were not sustainable became prevalent. ECB President Draghi declared on Thursday that high returns on government securities of some European countries weakened the influence of monetary policy on the economy. He reminded that among the ECB’s duties were to clear up the channels through which monetary policy influences the economy. He thus gave a clear message: if the hike in security returns eliminates the influence of monetary policy efforts, the ECB will take action to lower interest on securities. In other words, the Bank will purchase securities in the secondary market until interest rates decrease to acceptable levels. Analysts who closely monitor the developments in Europe – even those who [More]
    Switching from national currency to Euro
    Fatih Özatay, PhD 28 July 2012
    Will sound Nordic countries switch back to their national currencies letting the others stew in their juice? They were quite angry at us and they reacted “kindly” expressing their resentment. It was after the Turkish crisis of 2001 and before the global crisis of 2008. Working at the Central Bank of Turkey (CBT), I used to attend the semiannual meeting of the Bank of International Settlements, which is in a way the bank of central banks. Each one of these meetings was held with a focus on a Central and Eastern Europe countries, Turkey among them. Meetings were attended also by bureaucrats from the European Central Bank (ECB) and Brussels. [More]
    Lessons from the exchange rate policy
    Fatih Özatay, PhD 26 July 2012
    When implementing such policy, anti-inflationary efforts mustn’t be decelerated – or steps to create an impression as such must be avoided. For a couple of weeks I have been discussing if it is possible to implement a monetary policy that focuses on price stability as well as the value of the lira against FX. Now it is time to address lessons I learned from the Central Bank’s (CBT) policy between the late 2010 and August 2011 to lower the value of lira against FX. [More]
    Did it really work?
    Fatih Özatay, PhD 19 July 2012
    The intentional depreciation policy on lira did not contribute to Turkey’s competitiveness for the current period. Now we can discuss it comfortably. Inflation performance in the recent months was better than expected. Accordingly, analysts lowered their year-end inflation estimates. On the other side, the Central Bank (CBT) became more confident and assertive that its year-end estimate at 6.5 percent will be fulfilled. Meanwhile, severe criticisms on this column about the CBT’s policies became less probable to lead to a “defense reflex.” Maybe what I am going to say makes those who discuss the issue almost at the “those who like the CBT” vs. “those who don’t like the CBT” level rethink the issue on the table. [More]
    Unemployment inertia persists
    Fatih Özatay, PhD 17 July 2012
    Unemployment figures have been fiercely inert and steady except extraordinary periods. Unemployment figures for April were announced yesterday. I prefer not to use seasonally and working day adjusted figures for most macroeconomic indicators mainly in order to investigate whether or not existing trends have been changing. Adjusted data filtered several times may misinform you about the turning points. When it comes to unemployment figures, however, the picture changes. Unemployment figures have been fiercely inert and steady except extraordinary periods as the global crisis. Therefore, seasonally and working day adjusted figures give important intuitions on actual dynamics. [More]
    Adjusted growth figures necessary
    Fatih Özatay, PhD 14 July 2012
    It will be quite useful if the TURKSTAT releases GDP figures adjusted to extraordinary movements in gold trade. The Turkish Statistical Institute (TURKSTAT) has to assume a major role concerning the gold trade issue. Here is the story according to the press: to pay for the crude oil and natural gas imports from Iran, Turkey deposits money at a domestic bank on behalf of relevant exporter company. Since Iran is not able to fully benefit from the international transaction system, the exporter company asks the bank to transfer the payment in gold. The relevant bank imports gold for Iranian companies’ accounts and transfer the gold to Iran. [More]
    Current account deficit decreases, financing eases
    Fatih Özatay, PhD 12 July 2012
    It is quite pleasing that current account deficit has been decreasing and the quality of finance has been improving. Balance of payments figures for May were announced. Since 2010, high current account deficit and the large share of short term funds in deficit finance have been the major vulnerabilities of the Turkish economy. In October 2011, two-month cumulative current account deficit reached a record high $78.3 billion. Since then, the rate has been decreasing. Current account deficit in May was $67 billion, indicating a fall by $11.3 billion since October. Also, non-energy current account deficit decreased considerably. One of Turkey’s major vulnerabilities has been easing. Capital inflows pick up [More]
    Is the phase of slow growth over?
    Fatih Özatay, PhD 10 July 2012
    In May, industrial output picked up by 5.9 percent year-on-year. Have the period of slow growth that started in the first quarter of 2011 ended in the first quarter of 2012? If yes, will the growth performance in the second quarter differ greatly? I have been trying to answer these questions for some time now. This is why a number of recent commentaries focused on the assessment of latest figures. This commentary too is one of those. Yesterday, another data critical for the answer of above questions was announced. In May, industrial output picked up by 5.9 percent year-on-year. [More]
    Temporary gold exports and repercussions on growth
    Fatih Özatay, PhD 07 July 2012
    If Turkey’s gold exports were one million dollar lower; growth rate would be 2.6 percent instead of 3.2 percent. Recent changes in domestic demand have verified the analysis covered in a number of commentaries on this column before the gross domestic product (GDP) figures were announced. As was implied by several indicators, domestic demand grew year-on-year only by 0.9 percent in the first quarter. On the other hand, net foreign demand contributed to growth more than I expected. GDP thus grew by 3.2 percent in the first quarter of the year.  Exports were determinant Imports decreased and net foreign demand increased. What triggered net foreign demand growth was the strong rise in the export of goods and services, however: year-on-year export growth by 13.2 percent is almost record-high. [More]