Have any step been taken?
Fatih Özatay, PhD
10 September 2011
Industrial production seems to have left behind the trough. The answer to the question to which extent the economy has overcome the trough is "so so". Yesterday industrial production figures for July were announced. Seasonally adjusted level of production which had been decreasing month-on-month since February increased by 2.7 percent in July. This contradicts to the recent discourse that the economy has slowed down in the last couple of months. Of course no definite conclusion can be reached relying solely on the figures for a few months. But in the end, we are witnessing a considerable increase in the monthly industrial production.
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Does the CBT aim to gradually weaken the interest rate tool?
Fatih Özatay, PhD
08 September 2011
The new monetary policy makes me question whether the CBT is aiming to gradually weaken the short-term interest rate tool. From 2002 to the late 2008, when the global economic crisis intensified, the main policy tool of the Central Bank of Turkey (CBT) was short-term interest rate. Before 2008, the banking system had a fund surplus and thus the short-term interest rate applied for the CBT's overnight borrowing from banks. After the global crisis, the CBT activated different tools in order to relieve the banking system and secure that interbank transactions continue.
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Inflation and credit supply
Fatih Özatay, PhD
06 September 2011
During 2011, the difference became close to zero. In the last couple of months, however, the two indicators started to differentiate again. I will make a brief assessment of the latest credit supply and inflation figures. Consumer price index increased more than expected in August with the impact of the significant rise in food prices. Hence, annual consumer inflation reached 6.7%. The annual increase in the l index that the Central Bank (CBT) pays special attention to maintained the upwards trend in previous months and arrived at to 6.2%. This was in line with the CBT's expectations as was clearly declared in previous remarks.
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Reducing the debt
Fatih Özatay, PhD
03 September 2011
If Turkey wants to take more efficient measures against unemployment in rainy days; it has to create a larger room to maneuver in advance. Emin Dedeoğlu, a friend of mine who specialized and worked for years on public finance criticized by recent commentary titled "Room for maneuver". The commentary was about how to use the revenues to be generated via the "tax amnesty" judged by the "mixed law" No 2011. The last paragraph read, "So, here is the moral of this study: It is useful to spare some part of budget revenues in good days, for rainy days ahead."
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Asymmetry
Fatih Özatay, PhD
01 September 2011
If you comment so much on the exchange rate, you will be stuck in a difficult position when circumstances change. I have been chattering about 'commenting on exchange rate'. I could not fully enjoy this as the Jackson Hale speech of Bernanke interrupted it. Today let me continue from where I stopped.
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Looking ahead to a speech
Fatih Özatay, PhD
30 August 2011
Markets are looking ahead to the meeting Fed President will be holding with a group of central bankers and academics. All eyes were on FED President Bernanke who was going to make a speech at Jackson Hole on August 26. Markets were wondering whether or not Bernanke will announce a new quantitative easing (QE) program. This was the burning question. In his speech, Bernanke did not mention a new QE. He rather highlighted the strengths of the US economy. He stated that he has positive expectations especially for the long term. There were significant issues that have to do with the long term, but fundamental problems were rather short-term issues, he said. He also drew attention to the FED meeting to be held in September and stressed that a new assessment will be made thereby.
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When is it wrong to comment on the exchange rate?
Fatih Özatay, PhD
25 August 2011
In periods when risk appetite decreases, central bank officials should not comment on the exchange rate. I have been arguing that in the current climate of high uncertainties, it was not correct for central bank officials to comment and speculate on the exchange rate and that it was even worse to imply a certain level of exchange rate. I have written commentaries telling why I believe so this week. Since the issue is highly important concerning monetary policy, digging deeper might be useful. Today, I want to address the issue with reference to when it is and it is not wrong to comment. Therefore, I evidently do not argue that central bank officials should never comment on exchange rate. There might be periods when talking about the exchange rate might be harmless. However, mone
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Why don’t we leave the exchange rate on its own feet for now?
Fatih Özatay, PhD
23 August 2011
In the current milieu of high uncertainty, the CBT must refrain from implying preference for a certain level of exchange rate. It is for sure possible to evaluate the real value of the domestic currency against foreign currencies (the nominal exchange rate adjusted to the ratio of foreign price level to domestic price level). For instance, there is a point in stating that the Turkish lira is high-valued or low-valued in real terms. The real value of the Lira is of importance for foreign trade. In short, real exchange rate is an important variable. There is no dissensus on this.
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Room for maneuver
Fatih Özatay, PhD
20 August 2011
It is useful to spare some part of budget revenues in good days, considering rainy days ahead. I was talking about the budget burden of the measures that G-20 countries introduced or undertook to introduce in the first half of 2009, when the contractionary impacts of the global crisis were felt severely in order to stimulate domestic demand even slightly and support the financial sector.
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Commenting on the exchange rate
Fatih Özatay, PhD
18 August 2011
In countries like Turkey, the officials of central banks had better not comment on exchange rate or imply a certain level. In countries like Turkey, the officials of central banks had better not comment on exchange rate since such remarks, especially when frequent, might drag them into difficulty. This time, "countries like Turkey" do not represent emerging market economies. This time, I am referring to a sub-unit of emerging market economies: those which lack sufficient domestic savings and rely on foreign savings even for achieving potential growth rates; in other words, those which generally have a current account deficit.
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