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    Hope is the poor man’s bread
    Fatih Özatay, PhD 16 August 2011
    Hope is the poor man's bread, but it will be wise to draw lessons for Turkey's fiscal policy. The impact of the global financial crisis on production and employment began to be felt completely as of the late 2008 and during the first half of 2009. As of the end of 2010, the outlook in the countries that account for 90 percent of world's gross domestic product (GDP), excluding poor African countries was as follows: All developed countries and emerging market countries excluding China, Indonesia, India and Poland contracted substantially during the crisis. Turkey was also in this group. [More]
    What type of communication policy?
    Fatih Özatay, PhD 13 August 2011
    The rationale of the decisions of the CBT could not be understood. Therefore, one fails to estimate in which direction which tool will be employed next. It was assumed that once the price stability is achieved; financial stability will come automatically - evidently with the contributions of the micro regulations to be introduced by other relevant institutions. This belief became to be questioned frequently after the global crisis. Experts started to stress that central banks should launch a monetary policy perspective that guards price stability and financial stability at the same time. However, there is no theoretical framework about how to implement a monetary policy that will secure both price stability and financial stability. There is no experience in this regard, either. This lack o [More]
    Two mistakes
    Fatih Özatay, PhD 11 August 2011
    The crisis thought the CBT that ensuring price stability alone could not be the only objective of the central bank and that the scope of the monetary policy must not be limited to this aim. One of the important monetary policy lessons learned from the global crisis was that ensuring price stability alone could not be the only objective of the Central Bank (CBT) and that the scope of the monetary policy must not be limited to this aim. It was reiterated that central banks need to shape their policies as well considering the financial stability. Of course this has always been among the responsibilities of the central bank. But it was believed that one the price stability is ensured, others would come along with the help of the macroeconomic regulations and checks to be fulfilled by other rel [More]
    How to explain?
    Fatih Özatay, PhD 09 August 2011
    If the CBT aims to ensure price stability and financial stability at the same time, it must deliver remarks separately in relation with these two purposes. On Saturday I tried to write an empathetic article and understand the recent steps of the Central Bank of Turkey (CBT). I want to confess that I made a lot of effort to write that article. The reason is obvious, I guess: The CBT cannot express itself correctly. Let me give a couple of examples. [More]
    The decisions of the CBT are self-consistent
    Fatih Özatay, PhD 06 August 2011
    The decisions of the CBT are not contradictory. Again chaos is about to erupt. Global risk appetite decreased sharply in the last two days. European and US stocks markets dropped harshly. This increased the demand for German and US bonds, which are seen as the most reliable financial asset in such milieus, and thus reduced their returns. On the other hand, interest rate on many European countries increased due to the fall in demand for their assets. [More]
    Question mark
    Fatih Özatay, PhD 04 August 2011
    The Monetary Policy Board might decide to narrow the interest rate corridor in its extraordinary meeting today. My book "Financial Crisis and Turkey" was published in December 2009 (Doğan Kitap). The fourth chapter of the book is on the global crisis. It is titled "The Global Crisis: 2007-(?). The title has a question mark since the crisis had not ended by December 2009 and it was not certain when it will end. In April 2011, the third edition of the book was published. Though I added a new chapter and revised the other chapters in this edition, I did not change the title of the fourth chapter. The end date of the global crisis is still denominated with a question mark. [More]
    Everyone must pay attention to what they say or write
    Fatih Özatay, PhD 02 August 2011
    It will be wise if everyone paid attention to what they say or write, particularly in periods of high economic uncertainty. We are used to assessing the public debt as a ratio to the national income. This is how economics textbooks, academic journals and the press approach the issue. To join the Eurozone, for instance, the ratio of public debt to national income must be below a certain threshold. Yet, this threshold does no longer have a meaning; this is not to the interest of this commentary. [More]
    What does crisis mean?
    Fatih Özatay, PhD 30 July 2011
    Existing vulnerabilities are not as strong to trigger a domestic crisis unless unusual steps are taken in the field of economic policy. What does the word "crisis" imply? Monetary crisis implies the steep jump in the exchange rate and the collapse of the exchange rate regime due to a speculative attack increasing the foreign exchange (FX) demand. This movement is accompanied with sharp rises in interest rate. Financial crisis on the other hand refers to an earthquake in the financial sector, in which some financial institutions bankrupt and the rest suffer severe evaporation in capital. The process generally involves withdrawal of huge amounts of deposits from banks. Following these developments, the economy starts to shrink rapidly and unemployment rate shows an upward trend. [More]
    What do the triggering factors prove?
    Fatih Özatay, PhD 28 July 2011
    It became apparent that Turkey has vulnerabilities that might lead to sharp market movements in the case that sudden changes in perceptions are somehow created or caused by external developments. The way the economy will move towards in the short term is closely related with external factors. External factors refer to the developments in the European Union (EU) and the US. I will make two assumptions which are more likely to prove right: the decisions the EU took late last week implies that will to solution is gaining ground even though doubts started to be raised right after the relief of the markets with the announcement of the decision. So, my first assumption is that steps to this end will continue coming. Of course this assumption might prove wrong, but I will stick to it anyway. Seco [More]
    Why will Turkey be affected more severely?
    Fatih Özatay, PhD 26 July 2011
    The reason why Turkey would be affected more severely by the mentioned global circumstances if faced today is that today Turkey is encountered with bigger vulnerabilities. If the external conditions which had been witnessed in the harshest days of the 2008 global crisis were faced today, Turkey would have been affected more severely. Why? Before the answer, we had better take a brief look at that period. [More]