Shining like a star
Fatih Özatay, PhD
04 October 2011
The gap between per capita income in developed countries and in Turkey did not narrow down despite the 4.8 percent average growth. In his inauguration speech for the new legislative year, President Abdullah Gül stated an important point: If Turkey grows by 10 percent each year continuously until 2023; per capita income will reach 80 percent that of the European Union by then.
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Proposed solutions to reduce risks
Fatih Özatay, PhD
01 October 2011
IMF asks for the decisions declared after the summit on July 21st to be ratified completely.
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Deepening pessimism of the IMF, and Turkey
Fatih Özatay, PhD
29 September 2011
How should Turkey respond if the risks the IMF highlighted become reality? First it is necessary to stress one point: The Turkish economy will be sound and safe if the crisis in the European Union does not spread further but go back to the “abeyance” phase witnessed before August and no more bad news are heard from the US.
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An assessment of the IMF's recommendations
Fatih Özatay, PhD
27 September 2011
Turkey does not have the chance to put price stability on the back burner or give such impression. Now it is time to assess the policy recommendations of the IMF for Turkey. The IMF maintains that Turkey needs to tighten its fiscal policy given the current milieu signified by a substantially high current account deficit and the resultant increase in the foreign exchange (FX) requirement increasingly met via short-term borrowing. To this end, it recommends the tightening of the budget excluding transient revenues. I have stated this recommendation several times before. It would have been useful to act like a “foresighted businessman” when circumstances were suitable, particularly during 2010 and the first half of 2011. Now, however, uncertainties are high and Turkey might face a weak growth
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IMF marches to a different tune regarding the monetary policy
Fatih Özatay, PhD
24 September 2011
The IMF does not agree with the CBT though its gives their due. The IMF announced the preliminary conclusions of the 2011 Article IV Consultation report on Turkey on Thursday. The report is composed of three sections. The first section reviews the period after the global crisis and the second section highlights the challenges created by the post-crisis developments. The last section sets forth the economic policies recommended by the IMF. The main topic of today’s commentary will be those monetary and fiscal policy recommendations the IMF made.
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How should the new monetary policy be?
Fatih Özatay, PhD
22 September 2011
Risk-lover financial sector and asset price bubble had revealed that the “conventional” monetary policy will no longer be sufficient. Thanks to the Central Bank of Turkey (CBT), we have started to discuss to what degree the “conventional” monetary policy could solve the problems that emerged with the global crisis. I think this discussion was quite useful. What I mean by “conventional” monetary policy is the one that chiefly aims to secure price stability. The countries which implement inflation targeting regime specifically employ this type of monetary policy. The European Central Bank sticks to this type of policy although it does not have an inflation targeting regime and the Federal Reserve uses this policy to a large extent.
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Is it that hard to go beyond the orthodoxy?
Fatih Özatay, PhD
20 September 2011
The first credit facility Greece used had an interest three points higher than that on German bonds. Economic circles of the developed world have started to meet theories brought on mainly by developed country economists, thought to apply more for emerging market economies and thus not interested much in and considered to be outside the fundamental branches of economics. However, some economists, I have to say mainly those in Germany though I do not like generalizations, still are unwilling to become acquainted with these theories. The Bank for International Settlements (BIS), known as the central bank of central banks, organizes several meetings targeted at central bankers. I regularly attended some of those meetings when I was working at the Central Bank of Turkey. The meetings devoted t
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A fundamental problem: The rigidity of unemployment
Fatih Özatay, PhD
17 September 2011
It appears that the increase in the LFPR has prevented the fall in the non-agricultural unemployment rate to the pre-crisis level to a certain extent. Yesterday labor force statistics for June were announced. Recently, the impact of the crisis on overall unemployment has vanished completely. Before the crisis (during 2006 and 2007), average unemployment rate stood at 10.2 percent. The adjusted unemployment rate stands slightly above 10 percent for the last couple of months. Similarly in June the rate was 10.3 percent. In a way, we have returned to the unemployment rigidity before the crisis at 10 percent level.
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What is the most likely optimistic scenario?
Fatih Özatay, PhD
15 September 2011
Growth will be below the potential if the external conditions reflect caution. Have the fate of economies been bonded so closely to the steps that a couple of leaders and some politicians, who are obsessed with their opinions about the economy and have no intention for any compromise? The shape the economic growth and unemployment will take in a number of countries depends on two main factors. First is whether or not Obama's new plan that aims to reduce tax rates in order to reduce unemployment and to increase the spending on education and infrastructure will be adopted by the Congress. Second is whether or not Europe will take immediate measures to prevent the collapse? More concretely, will it issue Eurobonds and exchange with these the current debt of troubled countries? Or will the Eur
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Growth rate: Heads to where?
Fatih Özatay, PhD
13 September 2011
Growth performance was not surprising. Then, the "overheating" debates were intensified and the European crisis was yet to escalate. Gross domestic product (GDP) for the second quarter was announced yesterday. Turkish GDP increased by 8.8 percent year on year. Moreover, growth rate for 2010 was revised up from 8.9 to 9 percent and that for the 2011 quarter from 11 to 11.6 percent.
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