CBRT needs a new implementation framework
Fatih Özatay, PhD
19 August 2010
The following sentences are retrieved from the second page of the first inflation report published by the Central Bank of the Republic of Turkey (CBRT) in 2010: "The rise in inflation can be attributed to several temporary factors, rather than a deterioration in general price setting behavior. In fact, core inflation indicators in the last quarter point to an underlying inflation trend of around 4 to 5 percent."
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Ensuring shift of axis
Fatih Özatay, PhD
12 August 2010
In politics we frequently hear the argument 'We follow from so-and-so.' They put this argument to pride on. But were those who are followed really successful? On which criteria will we measure success? Let me make things easier for you and limit ourselves with the field of economy. Still, it is hard to answer this question. Today's Turkey is considerably different than the Turkey in four or five decades ago. Of course the change was in a good direction. In that case, there is a success in being proud on 'following from someone'.
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Missing out the phenomena
Fatih Özatay, PhD
05 August 2010
I started to write a series of commentaries on inflation targeting regime of Turkey. I mentioned some important points on Sunday and Monday. Today I will give a break and continue on Sunday from where I stopped.
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Significant deviations in inflation targeting
Fatih Özatay, PhD
02 August 2010
Turkey's experience with the inflation targeting regime initiated in January 2006 goes as follows: First, there is a significant difference between realizations and targets. Second, we are still far from 5 percent inflation rate, which is hardly a reasonable target. Third, estimates in the inflation reports published four times a year are revised to a large extent. Fourth, there also is a significant difference between the estimates and realizations. So today I would like to comment on the 'estimate-revision-deviation' problem.
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Investments recover reluctantly
Fatih Özatay, PhD
26 July 2010
We all know that investments contract significantly in crisis periods. Consumption decreases less then investments do. The reason is obvious: a large proportion of consumption expenditures constitute of basic expenditures. These are impossible to forego; so a shift to lower-quality products are observed. During the recovery from crises, the movements in investment expenditures generally do not match with the pace of recovery. The main reason might be the desire of investors to make sure that the recovery will be permanent.
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Single tool, three goals
Fatih Özatay, PhD
25 July 2010
It can be argued that the stability program supported with the structural reforms initiated right after the 2001 crisis outdated around 2007, though it is hard to provide a concrete date. It was then the time to introduce a program which will increase the labor demand, advance the skills of the labor force, expand the tax base, improve the investment climate, boost the access of small firms to finance, tackle informality in order to prevent unfair competition, and transfer funds for the efforts to this end. Such reforms were discussed in detail in this column under the heading 'micro reforms'.
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One stone, many birds
Fatih Özatay, PhD
22 July 2010
With a couple of commentaries I opened to discussion what can be done in the context of the monetary policy against the appreciation of the lira. A number of are commentaries on this issue are featured also in many daily newspapers. As you might remember, one of my recommendations was to change the inflation targeting regime after inflation rate is reduced to 5-6 percent. This change was to be made by establishing a framework which considers real exchange rate as well as the difference between the inflation rate and the targeted inflation rate and between the level of production and potential level of production.
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What happens to agricultural employment?
Fatih Özatay, PhD
19 July 2010
I really do not know much about the agricultural sector and I do not generally assess data on the agricultural sector. Nonetheless, today I want to write some comments on the value added created in the agricultural sector and employment. Let's see.
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Important developments of the week
Fatih Özatay, PhD
18 July 2010
Considering the important events of the last week for the economy, two issues come to fore though not much exciting: The postponement of the negotiations in the National Assembly on the bill of law on the fiscal rule and the intensification of the signals that US economy as well as the EU will recover slower than expected. Moreover, data an important indicator was announced: Unemployment data for April. The essence of my comments on bill of law on fiscal rule was that 'it is an important step with certain important missing points'. And these missing points were about the transparency of budget accounts and about the 'on time' audits. I also talked about two notes, one by Emin Dedeoğlu and the other by Ümit Özlale which talked about how the fiscal rule should be ideally. These can be access
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Finally, Turkey enjoys net foreign fund inflows
Fatih Özatay, PhD
15 July 2010
Today is again the day to comment on the recently announced data. A couple of days ago balance of payments data for May was announced. As we have been underlining, the global crisis affected Turkey most severely via two channels. First was that corporate and banking sectors encountered difficulties in accessing new loans from abroad. As a result of this, net fund transfers abroad took place. Second, exports were severely affected by global economic slowdown.
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