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    Things are the same at FED, we must focus on Europe
    Fatih Özatay, PhD 15 December 2011
    We should not expect a policy change that will trigger capital outflow from countries like Turkey until the end of 2012. After the committee meeting the day before, the Federal Reserve (FED) made a release which maintained that while the economy had been expanding moderately, unemployment rate remained elevated. It drew attention to the risk that problems of the global financial system might reverse the moderate growth performance. Also, it highlighted that inflation had moderated. [More]
    Will the Turkish economy grow in 2012?
    Fatih Özatay, PhD 13 December 2011
    2012 growth rate at the 1 to 3 percent interval seems reasonable. Yesterday, third quarter growth rate was announced at 8.2 percent. Growth figure for the first quarter, which had been revised upwards before, was updated in the same direction once again, to 12 percent. Therefore, Turkish economy grew by 9.6 percent year-on-year in the first nine months of 2011. Let me stress two points first. [More]
    A positive but insufficient step
    Fatih Özatay, PhD 10 December 2011
    This step is insufficient to relieve markets. Europe was in a vibrant mood for the last two days. First, the European Banking Authority (EBA) and then the European Central Bank (ECB) have declared policy decisions. Then on Thursday evening, European leaders met and hold a summit that lasted until Friday morning. First problems handled, and then the decisions taken: [More]
    Will Europe face credit contraction?
    Fatih Özatay, PhD 08 December 2011
    As calculations of the newly established European Banking Authority suggest, total capital gap of European banks amounts €106 billion. There are a few days before we learn the third quarter growth rate. Next year’s growth performance is of course of higher importance. All estimations including the official one declared in the Medium Term Program state that Turkey’s growth rate will decrease considerably in 2012. The level of growth and the risk of economic contraction relates closely to developments in Europe. [More]
    Will inflation rate increase further?
    Fatih Özatay, PhD 06 December 2011
    The upwards trend in inflation will be temporary. Inflation figures for November were announced. Annual increase in consumer prices reached 9.5 percent. Year end inflation for 2011 is expected to be around 10 percent. It appears that two elements were determinant of the rise in inflation: first, price of non-processed food products increased rapidly. Second, impact of the tax arrangements persisted in November, as well. None of these elements, however, have any significance for inflation dynamics unless inflation disrupts expectations and affect future contracts and thus push up the pace of increase in costs up. Still, let me check core indicators before reaching such an optimistic conclusion. [More]
    To unify the BRSA and the CBT?
    Fatih Özatay, PhD 03 December 2011
    In the context of what we have experienced since the late 2010, I believe it will be useful to discuss unifying the BRSA and the CBT. There is a common belief that monetary policy practices of developed countries also played a role in the process that dragged us towards the global crisis. Due to this, there is an ongoing quest for a new academic framework for monetary policy. Some monetary economists are trying to answer the question, “What type of inflation targeting regime can protect financial stability as well as price stability?” There have already been released a couple of qualified academic studies. I said ‘some monetary economists’ since some studies do not necessarily limit themselves to inflation targeting regimes. Today let me address some preliminary findings of these. [More]
    Vicious loop
    Fatih Özatay, PhD 01 December 2011
    The current public debt/GDP ratio in Italy is too high, at 120 percent. The main reason why the interest rate is high is the high level of public debt. During the auction held on Tuesday, Italian Treasury sold bonds worth € 7.5 million. Interest on three-year and ten-year bonds rose to 7.89 percent and 7.56 percent, respectively. The rate that appeared in the previous auction on ten-year bonds was 6.06 percent. Average inflation rate for the last twelve months was 2.5 percent. If we assume that the rate will remain more or less constant, the given rates correspond to 5 percent in real terms. In short, currently Italy has to agree to pay 5 percent interest to borrow. OECD expects that Italy will grow by 0.5 percent in 2011. Growth estimations for 2012 and 2013 are minus 0.5 percent and 0.5 [More]
    Need for a new economic program (4)
    Fatih Özatay, PhD 29 November 2011
    It is quite difficult for Turkey to improve per capita income to the level of developed countries with the current savings rate. I started to write this series a while ago and said that I will continue writing regularly on this issue as occasion serves. Until today, I did not have the chance to give a break and here comes the fourth commentary of the series. As you might remember, I kind of implied that I was not happy with this title. Since it is the fourth commentary of the series, however, the best is not to change it. So, please assume it says “need for a new long-term economic program” or “need for a long-term economic program” as we do not have an “old” one. I believe this would be a better title to convey my message. [More]
    Need for a new economic program (3)
    Fatih Özatay, PhD 26 November 2011
    Turkey’s trade deficit heals during crises, but this is not exactly pleasing as the underlying reason of this improvement is the contraction of the economy. Merkel, Sarkozy and new Italian Prime Minister, Monti, met in Strasbourg on Thursday. During the press meeting, Merkel reiterated her opposition to the proposal to issue a common bond, Eurobond, or to the intervention of the European Central Bank putting its weight behind the debt crisis. In short, Germany persists on its acknowledged attitude. According to many analysts, however, this attitude is about to cause Europe to hit the brick wall at full speed. Meanwhile, the Joint Select Committee on Deficit Reduction of the US has failed before reaching any agreement. Republicans once again opposed to the plan to raise tax rates in expense [More]
    Need for a new economic program (2)
    Fatih Özatay, PhD 24 November 2011
    Turkey’s production is highly dependent on the import of intermediate goods and investments are highly dependent on the import of investment goods. Adding the fact that it is a net energy importer, the picture is not surprising. [More]