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    A series of oddities
    Fatih Özatay, PhD 26 September 2013
    In the first seven months of the year, gold imports were almost equal to machinery and equipment imports! Will Turkey grow via gold imports? Turkey is an increasingly odd economy. Today I will enumerate some of the striking oddities concerning Turkey’s economy. Please note that this is not an exhaustive list but just a preliminary one. [More]
    Overpraising (n+1)
    Fatih Özatay, PhD 24 September 2013
    We have to stop overpraising Turkey’s economy and face the reality. This is the only way to solve the problem. Brace yourselves now. I will divide the post-1990 period into three sub-periods: 1990-2002, 2003-2007 and 2008-2012. Do you know when net foreign borrowing in proportion to the GDP was highest, that is, difference between new foreign borrowing and foreign debt repayment was largest? In the 2008-2012 period. This is also when the GDP per capita growth rate was relatively lower! [More]
    Thus spoke the central authority…
    Fatih Özatay, PhD 21 September 2013
    Let’s say that there are 100 theology faculties in Turkey. YÖK asks their opinion on such a resolution and 99 of them votes for it. In the early 1980s, Robert Frank wanted to offer a new elective course at the Cornell University on behavioral economics, a newly sprouting field then that combines psychology with economics. Noting that undergraduate students did not know about this new field, he tried to come up with an appealing course title so that he could attract them to enroll. [More]
    The abnormality of the normalization process
    Fatih Özatay, PhD 19 September 2013
    So, if the FED announces the anticipated steps, will that be the end of the story? Not even close, unfortunately. Two main matters of debate concerning FED are ahead of us Can normalization be abnormal? We nowadays realize that it can. For weeks now we are obsessed with the steps the Federal Reserve (FED) is expected to take. These are considered steps for normalization in line with the FED’s discourse. Yet, the normalization process, at least a large part of it, will be a first for all of us. Hence it is abnormal and although it is not much voiced, the world is afraid that the abnormality will bring brand new troubles. [More]
    What’s the purpose of raising FX spending with imports decreasing?
    Fatih Özatay, PhD 14 September 2013
    If I were in the shoes of the economy management, I would elaborate on the correlation between the hike in gold imports and the current economic policy. Have you seen the gold certificate commercials on TV? They are announcing it dancing with joy. What should I say? I will go with “let’s hope for the best” as you usually do in such occasions. [More]
    Signs of a fall in Turkey’s potential growth rate?
    Fatih Özatay, PhD 10 September 2013
    It is likely that with a short-term drop in foreign finance opportunities, Turkey’s current account deficit might not fall in the short-term and rise back to its normal level. Yesterday industrial output figures for July were released and today will come the GDP figure for the second quarter. Given the current climate marked by financial tensions, we may conclude that these figures will not bring light on Turkey’s economic performance in the period ahead. This is mainly because the impact of exchange and interest rate movements and changes in foreign finance opportunities on GDP will be lagged. [More]
    Cold comfort
    Fatih Özatay, PhD 07 September 2013
    Let’s assume that until today not even a dime has left and will leave Turkey. Is this enough for a relief? “Fund outflow from Turkey was rather limited.” they say. They give figures and evaluate those on news shows. They breathe a sigh of relief claiming that what we feared did not happen. Then they get a bit confused about increases in exchange rate and interest rate. [More]
    Two critical mistakes played a key role
    Fatih Özatay, PhD 05 September 2013
    Since the late 2010 up to today, the interest rate policy of the CB relied mainly on the exchange rate movements. No, we are not ruined or anything. True, interest and exchange rates will be higher and 4 percent growth for the next couple of years will burst us with happiness. But don’t worry, to save us from the trouble of bursting, growth rate will most probably settle at a considerably lower level. Meanwhile, unemployment rate will get stuck at 10 percent. The level of investments will decrease, year-end inflation rate will float around 8 percent. It will probably be slightly higher in 2014. Yes, this scenario is a bit pessimistic, but it will not be disastrous. Of course, these hold under the assumption that Turkey will not get involved in Syria further. [More]
    BISIT...
    Fatih Özatay, PhD 03 September 2013
    In each and every report and article released recently, you see these five countries on the top of the list for countries which will be affected most severely by the decisions of the FED. BISIT is the acronym for Brazil, Indonesia, South Africa, India and Turkey. In each and every report and article released recently, you see these on the top of the list for countries which will be affected most severely by the decisions of the Federal Reserve (FED). This is because none of these countries have lived within their means. They have invested more than they have saved. In short, they have current account deficits. Current account deficit in proportion to GDP (%) was 2.3 in Brazil, 2.8 in Indonesia, 6.3 in South Africa, 3.4 in India and 6.1 in Turkey in 2012. Now take Turkey. Its average grow [More]
    Why not temporary?
    Fatih Özatay, PhD 31 August 2013
    I believe underlying the decisions the Central Bank has or has not taken it is this feeling that the current international tensions will prove temporary. Are they really? I previously expressed that the prediction that dollar will hit down to 1.92 TL by the end of the year is based on the feeling that the current international tensions will prove temporary. I believe it is this feeling that underlying the decisions the Central Bank has or has not taken. Are they really temporary? [More]