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    The new education reform bill: 4+4+4
    Fatih Özatay, PhD 25 February 2012
    There exists a close link between the level of education and the level of welfare in a country. Income levels of countries are revised on the basis of the price of similar goods for comparison purposes. Otherwise, income gap between developed and developing countries would become huge, giving the impression that people in developing countries starve to death. For instance, food is relatively cheaper in developing countries than in developed countries. In a developing country, the price of the same goods basket is generally lower than that in a developed country. [More]
    What if Greece leaves the Eurozone?
    Fatih Özatay, PhD 23 February 2012
    Many experts argue that the only viable option for Greece is to leave the Euro and return to the Drachma. Here is the million-dollar question: What is the risk that the recent development about Greece will change the risk appetite across international markets, affecting the level of fund inflows to Turkey and thus the 2012 growth? [More]
    Zero interest rate
    Fatih Özatay, PhD 21 February 2012
    Should the interest rate will go zero in line with the Friedman rule and if the normal real interest rate aimed at 2 percent, inflation has to be -2 percent. There is one subject I did not write about as it did not attract attention when it was raised: ‘Zero interest rate’. Today I would like to address it with a different perspective. ‘Zero interest rate’ is one of the debatable topics of monetary economics. It is generally covered as a sub-section in advanced monetary policy textbooks. The issue also has to do with the question “what is the optimal rate of inflation?” which I will raise today. Studies which aim to answer this question generally start with examining how interest rate can go zero. For example, Handbook of Monetary Economics (Elsevier, 2011) Volume 3 has a chapter titled “T [More]
    Turkey’s position in the world growth volatility league
    Fatih Özatay, PhD 18 February 2012
    For the 2000-2010 period, the volatility of growth in Turkey is higher than that in 130 of 184 countries. Forecasting is a technical issue. Estimates are made upon a predicted model which runs according to certain assumptions. These include, among others, the barrel price of crude oil, the policy rate set by the Federal Reserve (FED), whether or not the European Central Bank (ECB) will introduce a quantitative easing, or whether or not domestic tax rates will be changed. Different scenarios can be set based on particular combinations of these variables. For instance, if you are to estimate growth and if your model tells you that risk appetite is chief among external indicators which affect growth, you can construct different scenarios by keeping tax ratios and the price of crude oil consta [More]
    What are the macroprudential legal powers?
    Fatih Özatay, PhD 16 February 2012
    By the end 2012, the UK is going to have united the banking regulation authority and the central bank. Important steps are being taken to this end. Almost everyone agrees now that financial stability must be addressed both at the micro (bank) and macro (the entire financial system) level. There was no such distinction before the global crisis. Thus, the relevant institutional infrastructure is not in place. Now the world discusses under which governance structure macroprudential financial policies could show healthier results. [More]
    The Financial Stability Committee
    Fatih Özatay, PhD 14 February 2012
    In order to serve its purpose, the Financial Stability Committee must be revised in terms of its governance structure. In the light of the lessons learned after the global financial crisis, it was argued that central banks shall play a bigger role in preventing, managing and solving crises. Many economists have been pondering on this issue, and as a result a number of studies emerged. In this context, I have been discussing for a long period how macroprudential financial policy and monetary policy can be implemented simultaneously. [More]
    The debate on the reorganization of the BRSA and the CBT
    Fatih Özatay, PhD 11 February 2012
    My recommendation was either to transfer certain powers of the BRSA to the CBT or unite the two agencies. I have been receiving comments on my recommendation on a new institutional regulation as stated in the conclusion of the search for a new monetary policy series. The institutional recommendation I put forth was that in order to secure that the monetary policy safeguards financial stability, either the Banking Regulation and Supervision Agency (BRSA) shall transfer certain powers to the Central Bank of Turkey (CBT), or the BRSA and the CBT shall be united. [More]
    How will be the mood in 2012?
    Fatih Özatay, PhD 09 February 2012
    Fund inflows towards Turkey have been rising. Should these circumstances prevail, 2012 growth can be considerably above the official estimate, 4 percent. Readers continue contributing to the discussion on a new institutional regulation as I recommended in the last commentary of “the search for a new monetary policy” series. I will address those on Saturday. The day before, industrial production in December was announced. So today, taking departure from the data, I want to go back to growth forecasts for 2012. [More]
    Before ships leave the harbor…
    Fatih Özatay, PhD 07 February 2012
    I am expecting contributions from other readers to publish here before ships leave the harbor. The search for a new monetary policy series recommended a new institutional regulation as conclusion. I have received a couple of comments on this recommendation. One came from my dear friend Baha Karabudak, prominent expert on competition and regulation in Turkey. He has been teaching undergraduate and graduate courses in these areas in the Middle East Technical University and Bilkent University. Following the greeting phase, his letter said: [More]
    Inflation within the current picture...
    Fatih Özatay, PhD 04 February 2012
    Clearly, should the relatively positive climate that emerged along with the beginning of 2012 continues, Turkey’s inflation will be affected positively. Annual inflation in 2011 stood at 10.4 percent. After January 2012, the rate increased to 10.6 percent. H and l indicators also increased slightly in January: annual inflation increased by 0.2 points to 8.8 percent under the H index and by 0.3 to 8.4 percent under the l index. The Central Bank of Turkey, CBT, expects a remarkable drop in annual inflation particularly during the last quarter of 2012. The mid-point of year-end inflation forecasts is 6.5 percent, above the 5 percent target. Can this forecast be realized?  It is possible that this forecast will be realized. First, though higher than others, the official growth estimate at 4 p [More]