Growth analysis with two dual character
01 April 2010
Yesterday rate of economic contraction for 2009 was announced: 4.7 percent. Contraction is lower than expected. Upon newly announced figures, formerly declared gross domestic product (GDP) data for 2008 and 2009 were also revised. Rates of contraction for the first three quarters of 2009 were reduced. On the other hand, it was realized that growth rate in 2008 was lower. 2008 growth rate, known to be 0.9 percent, was realized to be 0.7 percent.
Greece will take a deep breath, but will not be in comfort
29 March 2010
The preceding week was quite critical for Greece. The decision European Union will make in the Euro-zone country leaders meeting last week was of vital importance for the country. But, will the resultant rescue plan implied in the delivered statements enable Greece to take deep breath? The short answer is, though it will, the process will not be easy and comfortable. There are some problems related with design. I will try to clarify the issue.
Incentives and institutions
28 March 2010
Incentives have a critical importance in economic theory: they determine individuals' behaviors. For instance level of development of an economy is related with the type of incentive mechanisms designed. As a result economists put a special emphasis on the designing of incentive mechanisms. Before advancing on 'divine' issues like development level, let me return to an interesting book I mentioned before. First chapter of Levitt and Dubner's Freaknomics starts with the following example:
Countries other than Turkey take measures against unemployment
25 March 2010
After the deep crisis in 1997, unemployment rate in South Korea jumped from 2.5 percent in 1996 to 7 percent in 1998. With the policies implemented that point onwards, Korea reduced the unemployment rate to 3.3 percent in 2002. How did Korea achieve this?
Our 'deep' problem and 2015
22 March 2010
Good news was heard from the Standard and Poors who increased Turkey's credit grade. Turkey's performance is quite pleasing given that some EU member countries also in the Eurozone are faced with serious problems. The main reason for the increase of Turkey's credit grade is the fact that the financial sector does not encounter much problem. Particularly considering the 1980s, the progress Turkey made with respect to stability should not be underestimated. I believe it is quite obvious that if we had been caught by the global crisis with a weak banking sector, high public debt and high budget deficit, we would have gone through highly rough times.
The vitality of fiscal rule
08 March 2010
We know that politicians can pursue practices that distort economic stability in order to stay on power. There are a number of institutional and applied studies verifying this. What is more, there are many findings that such practices are used even in advanced democracies. For Turkey's case we know practices that distort stability are put in force especially in the eve of elections.
Development gaps and institutional structure
07 March 2010
After the World War II, Korea split into two. In 1948 when the split actually took place upon the elections carried out in the South, level of per capita income was almost the same in the South and in the North. In the process, the two countries established quite different economic and political institutions. Currently South Korea is almost twenty times richer than the North Korea. The two countries clearly share the same culture and the geography. In that case, this source of this significant development gap should be searched in institutional differences. In his book Modern Economic Growth (2009, Princeton University) Daron Acemoğlu states that the Korea example is not sufficient to verify that the main reason for development gaps between countries is institutional differences. After all
Independence, fiscal rule and credibility
04 March 2010
In democracies, governments in power naturally have concerns about getting reelected. Studies on political economics reveal that aiming for reelection can lead to arrangements that distort economic stability. In the realm of economics, institutional regulations that will minimize such arrangements which distort economic stability and go against the opposition parties to fit those within the scope of democracy are frequently discussed.
01 March 2010
Fiscal rule came to agenda once again last week in Deputy Prime Minister Ali Babacan's meeting with economy editors, and was widely featured on the media since then. Some media organs even presented formulas. I am sure some of my readers are bored of the graphs and figures involved widely in some of my commentaries. But please note that, as far as I remember, I have never gone that far and used formulas with x's, y's and z's in it. So, please regard my merciful attitude. I have assumed this attitude concerning the fiscal rule discussions mainly because formulas are not at the top of the list when you enumerate the important issues about the fiscal rule. I have mentioned the issues I found 'more important' in my commentaries. I have to address one of these again because of two reasons. Firs
Do development gaps depend on geography and culture?
28 February 2010
We should not be fed up with presenting this table that shows development gaps between countries; because it is quite impressive. It successfully summarizes the performance of the present generation and that of the previous generation starting with 1950s. It also indicates that the generations following us should behave differently since it underlines that Turkey did not achieve a relative progress in comparison with developed countries over the last five decades. It shows that the gap between the former and the latter did not change at all; and in short that Turkey went round in circles.