Some distinguishing features of the economy in 2010
Fatih Özatay, PhD
02 January 2011
What is the unchanging characteristic of Turkey's economy? When you think about the most distinguishing feature of the year 2010 considering Turkey's economy, the radical change in the finance of current account deficit comes to fore by far. I will deal with this tomorrow. When you think about the constant feature of the economy in the year 2010, there appear a number of elements. Today let me talk about two of them. First is that it was a year where no step was taken to change the status quo. This is such an important element; but I will not talk further on this for now. The second will allow self-criticism; so let me begin with that.
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Rapid credit expansion
Fatih Özatay, PhD
30 December 2010
There is bulk of evidence that rapid credit expansion is risky. The pace of expansion of bank credits is really dazzling. Today I want to examine the movements in credit volume net of price movements from 2004 to present. I started the period of analysis with the year 2004 as it is the year when the credit volume of the banking sector hit severely by the 2001 crisis re-achieved the pre-crisis level in real terms.
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A criticism about the CBRT
Fatih Özatay, PhD
27 December 2010
I know no academic research stating that current accounts are a tool for monetary policy. On Thursday I dealt with the recent decision of the Central Bank of the Republic of Turkey (CBRT) in terms of the aspect I supported, which is the fact that the Bank breaks the routine. On Sunday I referred to risks: particularly the absence of a direct limit to short term capital inflows elevates the risk that the decisions will prove ineffective. And today it is time or a critic.
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The sin of CBRT
Fatih Özatay, PhD
26 December 2010
What are the risks incurred by the latest TCMB decisions? With latest decisions the Central Bank of the Republic of Turkey (CBRT) has been trying to establish a monetary policy framework in the context of the changing circumstances that regards price stability together with financial stability as far as its Law allows. I have underlined in my recent commentaries that the CBRT is doing the right thing in highlighting financial stability alongside the price stability in the face of highly uncertain global circumstances. So now it is time to highlight the potential risks.
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Breaking the routine
Fatih Özatay, PhD
23 December 2010
We owe the Central Bank a debt of gratitude for pursuing the second option. Is human mind so advanced to come up with a theory that will never change? Please leave the 'isolated' world of theories and meet the chaos of the real life. Can you draw an inalterable implementation framework based on a theory?
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Dwarf stars
Fatih Özatay, PhD
20 December 2010
Growth performance since 1950 was inadequate to close the income gap between developed countries and Turkey. The last general elections were in 2007. On the eve of next elections we had better check how Turkey's economy performed between 2007 and 2010. Assessing two important macroeconomic variables - growth rate and unemployment rate - would be enough for a healthy assessment. I take growth rate and unemployment rate for 2010 as 7.5 percent and 12.2 percent, respectively where the latter corresponds to the average of the first nine months of the year.
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Interest rate decision was necessary but not sufficient
Fatih Özatay, PhD
19 December 2010
The measures introduced by the Central Bank are not sufficient. It appears that the decisions announced by the Central Bank of Turkey (CBT) will be highly debated. On Friday BRSA (Bank Regulation and Supervision Agency) also made similar regulations. This way the will to limit the rapid credit expansion was reinforced to a certain extent.
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New era in monetary policy
Fatih Özatay, PhD
16 December 2010
Which option should Turkey pursue to overcome the trouble caused by developed countries? The latest Financial Stability Report (FCR) by the Central Bank of Turkey (CBT) says: "Developing countries mainly preferred to respond to the surging capital flows with policy tools discouraging capital inflows. In Turkey, different than other developing countries, measures reinforcing financial stability are preferred alongside with the hike in capital flows."
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If you obstinate with the market, you will become a plaything
Fatih Özatay, PhD
13 December 2010
European leaders' inability to make decisions until the last minute gets reactions. Take a look the conditions facing the European Central Bank. It has to purchase the bonds of problematic countries of the European Union. Thus it gives way to monetary expansion. This way it saves time for the European Union leaders which somehow cannot make decisions to provide a radical solution to the existing problem. On the other hand European Central Bank's saving time for the leaders also play a role in the delay in leaders' decisions or in the introduction of band aid measures which reinforces the problems felt in the troubled countries. This is such a bitter situation facing a central banks. Reaction grows against European leaders
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Growth performance is pleasing, but then what?
Fatih Özatay, PhD
12 December 2010
Then, locomotive of growth can only be domestic demand. On Friday we heard the growth figures for the third quarter of the year. Both the industrial production figures and data related to GDP as announced before Friday implied that growth was above expectations. But the growth figure for the third quarter remained below the expectations for the first time: 5.5 percent.
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