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  • August 2018 (4)

    Non-revolving funds, part-time, and full night
    Fatih Özatay, PhD 03 August 2013
    The full-time law forced professors of medicine to choose between private practice and hospitals. Think of an industrialist who throws away half of the functioning and vital machinery in his production facility. It does not make sense, does it? Let’s say that he did that for some reason and will bear the consequences. Assume that the facility produces fundamental machinery that new businesses require to open up factories and engage with production. The country has only a few of businesses producing such inputs. If the owners decide to throw away the ticking machinery, you cannot say “their business, their concern.” Right? Or assume that due to a decision of the economic management, a considerable proportion of the machinery becomes useless and dysfunctional. This affects the production of [More]
    First praises, then criticisms
    Fatih Özatay, PhD 01 August 2013
    Citing temporary incidents of “success” as evidence to the anti-inflationary efforts is just not nice. Do you check the reports and studies the Central Bank (CBT) releases? The vast majority of them are just wonderful. This makes me particularly proud as I used to work at and direct the research unit for a long time. A large group of experts for whom the top universities of Turkey would compete to employ work at the CBT. The Bank achieves this high research quality by prioritizing education. It attracts the best of best young brains who studied in the top universities of Turkey. It sponsors the graduate studies of these bring people and sends them to the best universities of the world. The Bank has been implementing this model for a long time now. In addition, it attracts professionals who [More]
    Risks ahead and growth prospects
    Fatih Özatay, PhD 30 July 2013
    Per capita growth rate in the last six years will be 1.85 percent compared to the 1950-2007 average at 2.72 percent. A few years ahead will probably be challenging for Turkey concerning growth. There are many reasons strengthening this risk. The first one is well acknowledged: the series of steps the Federal Reserve (FED) is planning to take in the next three to four years. As a first step it will lower the volume of additional injections it has been carrying out on a monthly basis since the late 2012 and cease additional injections in the mid-2014. Later, according to the available information in 2015, it will raise the federal funds rate, but it will signal the time of rate raises well in advance. At the same time, it will be withdrawing the liquidity it previously injected. In this envi [More]
    Why are the higher education exam results tragic?
    Fatih Özatay, PhD 27 July 2013
    How do people who think that it is a big accomplishment to turn each and every plain plot of land into a construction zone not design a tuition system which will enable students to study at any university they like? [More]
    Confidence in the economy: increasing or declining?
    Fatih Özatay, PhD 25 July 2013
    Without confidence in the economy, people defer their investment decisions and wait for the fog to disperse even if there is access to loans and interest rate is at a reasonable level. [More]
    To be on the safe side
    Fatih Özatay, PhD 23 July 2013
    If the CBT raises its policy rate, this would mean it wants to keep interest rates at higher levels for at least a few quarters. It is a decisive moment for the Central Bank of Turkey (CBT). The Monetary Policy Committee convenes today. As those who keep tabs on will know, the CBT declares multiple interest rates. Three among these are of importance: the CBT’s overnight lending rate (the top-end of the interest rate corridor), the CBT’s overnight borrowing rate (the bottom-end of the interest rate corridor) and the policy rate within the corridor, i.e., the CBT’s weekly lending rate. [More]
    Does “many” melt into “nothing”?
    Fatih Özatay, PhD 20 July 2013
    The construction frenzy might enable high growth rates over a certain timeframe. But this performance will in no way be sustainable. Is it possible to close the income gap with rich countries by turning the entire country in a construction site? If it were, a lot of countries would have made it to the league of rich countries by focusing solely on infrastructure. But there are only a few countries in the league. True, it took quite long to make it to there, but their success was built not on infrastructure investments alone. Of course it is important to build highways, rapid train lines, bridges, and dams. These are required to attain rapid growth and close up the income gap with rich countries. Unfortunately, as studies suggest, they are not sufficient alone to make to the group of high-i [More]
    That is what independence is for
    Fatih Özatay, PhD 18 July 2013
    For the sake of the country it is critical to construct the monetary policy on an exclusively “technical” framework and avoid comments which in some cases press the Bank. In periods where significant upswings in exchange rate are observed in Turkey, a diverse array of questions and comments get to be heard. Why does the Central Bank (CBT) sell foreign exchange (FX) at low price? To whom it sells the FX? Why does it deplete its FX reserves so rapidly? When the CBT is supposed to use its reserves if not in times like today? And the list can be extended. The CBT is as often recommended about interest rate decisions. And assume that apart from these, the government “requests” the CBT not to use or refrain from using certain policy tools. [More]
    Financial problems: temporary or permanent? (2)
    Fatih Özatay, PhD 16 July 2013
    The Central Bank of Turkey should increase its policy rate. The market rate already reached 9 percent. Last time I raised a question and left it to you to answer. Now it’s my turn. The question was whether the current problems in the financial markets are temporary or permanent. By first I want to correct a mistake in the last paragraph. Though the general framework of the commentary tells it, the mistake might harm the coherence of the story. So, below is the corrected version of the conclusion of the previous commentary: “In conclusion the FED will 1) first cease additional injections 2) initiate withdrawals 3) increase federal bond rate 4) accelerate the withdrawal process 5) revise the plan under the light of new information. [More]
    Financial problems: temporary or permanent?
    Fatih Özatay, PhD 13 July 2013
    The FED will first cease additional injections, than initiate withdrawals, and increase federal bond rate. Question: What do you think about the current problems in the financial markets? Are they temporary or permanent? This question is of critical importance for the economic policy response that should be given. They require different responses. I would ponder on this question especially if I were in the shoes of central bankers of Turkey. Of course posing the question alone does not fulfill my duty. I am sure everyone there are aware, but I would like to summarize some important points. After all, a friend in need is a friend indeed. [More]