If the fiscal policy is not tight
Fatih Özatay, PhD
14 April 2011
Turkey has chosen to implement a "loose" fiscal policy in 2010 taking into account the general elections ahead. Turkey's economy grew impressively by 8.9 percent in 2010. The economy had overcome the "v" shaped trough hit during the crisis in the third quarter. The gross domestic product (GDP) attained in the fourth quarter certified the turning around of the economy. The peak level of GDP before the crisis was recorded in the first quarter of 2008. The GDP in the last quarter of 2010 is 5.4 percent higher than the peak level before the crisis.
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Do short term fund inflows slow down?
Fatih Özatay, PhD
12 April 2011
Banking and the corporate sector could access to long term borrowing. Moreover, use of long term capital stood above that of short term capital. Balance of payments statistics for February were announced yesterday. Current account deficit was quite high in 2010, corresponding to 6.6 percent of the gross domestic product (GDP). Turkey had high current account deficit in the past, too. For instance, in 2006 the ratio of the current account deficit to the GDP was 6.1 percent.
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Smart boys
Fatih Özatay, PhD
09 April 2011
You cannot benefit sufficiently from the experts at international standards which are already few and thus you cannot fulfill your desires in the international race of development. I would like to dig deeper in the last paragraph of my commentary on Thursday. It ended as follows: "Unfortunately, level of educational attainment and skills in Turkey is not as high as the developed countries or those rapidly catching up with the developed countries. We are all aware of this fact. However, we frequently miss out the fact that we cannot sufficiently make use of the experts that have above-the-average level of educational attainment and skills. To put it differently, we fail to benefit sufficiently from the potential we have."
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Is the code in the university entrance exam also the code of the level of welfare?
Fatih Özatay, PhD
07 April 2011
Citizens' having high educational attainment and a wide set of skills are one of the main reasons enabling nation-wide prosperity. I took the university entrance exam in 1973. Back then, Middle East Technical University (METU) made a separate exam in addition to the general university entrance exam. I took the general exam; but the next day newspapers were full of allegations that exam questions were stolen and disclosed to some students. If I am not mistaken, it was the Cumhuriyet newspaper that first featured such allegations. In the end, it was understood that the claimed scandal was real; and thus the exam was cancelled.
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Possible outcomes of the efforts towards fiscal discipline
Fatih Özatay, PhD
31 March 2011
The extraordinary recovery performance can be utilized to get prepared for the rainy days. To remedy the rise in the unemployment rate and the fall in production during the crisis period, developed countries in particular have loosened the fiscal policies. Tax rebates were executed, tax rates were cut and public expenditures were increased. Preceding these measure packages, they had initiated a bailout operation in order to put out the fire that surrounded the financial system. In consequence, budget deficits increased, borrowing was expanded to be able to finance the deficit and public debt hiked.
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Different aspects and breaking the routine
Fatih Özatay, PhD
29 March 2011
We then came to discuss that inflation targeting regimes must aim to promote financial stability as well as focusing on the inflation and the production gap. After I sent my commentary that criticized the accounts that considered the latest decisions by the Central Bank of Turkey (CBT) to be a "surprise", I came across to the articles of two commentators I like and follow: one on that day in the Dünya daily (Taner Berksoy) and the other in the day after in Radikal daily (Servet Yıldırım). They both argued that the CBT's decision was a surprise, too. Their interpretation of the decisions as a surprise followed from the fact that some officials said new decisions will not come until the end of March.
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What surprise?
Fatih Özatay, PhD
26 March 2011
When you make clear facts a matter of debate, you cannot save time to focus on the actually debatable dimensions of the decision. I had no doubt that we are living in a very odd country. That I was right was reiterated again two days ago. What other adjective than "very odd" can we use if the attempt to ban an unpublished book is furthered to the next step? Think about it: if the next step is to prosecute those who are in an effort to write a "dangerous" book and the people they have talked to, how can we define the characteristics of Turkey?
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Economic problems ahead for Egypt and Tunisia
Fatih Özatay, PhD
24 March 2011
Turkey is facing the same medium and long term problems with Egyptian and Tunisian friends making effort towards democratization. Seventeenth annual conference of the Economic Research Forum (ERF) for Arab countries, Iran and Turkey was carried out in Antalya between March 20th and 22nd. In these conferences academic studies about the region are presented and debated. Further, experts are invited to the conference to make presentations on specific subjects. ERF is a research network based in Cairo.
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On the budget
Fatih Özatay, PhD
22 March 2011
We could have tightened the budget further to save means for rainy days and to reduce the current account deficit. We still can. The budget balance is affected severely by the general outlook of the economy. For instance, in phases of rapid economic growth, tax revenues increase even if the decision makers made no concrete attempt to this end. On the other hand, when the economy contracts, budget transfers grow depending on the prevalence of social policy decisions. For example, budget expenditures increase due to the rise in the unemployment payments. Since the relevant laws define the preconditions and amounts of such transfer expenditures, certain falls or rises in expenditures occur automatically regardless of new economic decisions.
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From 'how to raise credit volume' to 'how to reduce credit volume'
Fatih Özatay, PhD
19 March 2011
Two and a half years ago I was seeking to identify how the volume of credits bank extend could be increased. Currently I am thinking through how the latest decisions by the Central Bank can become more efficient.
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