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    Why credits to SMEs drop while bank credits increase?
    Güven Sak, PhD 11 March 2010
    For a while I am trying to call attention to the dual structure of the recovery process. At first glance it appears that positive growth it achieved. After the rapid contraction in 2009, economic activity seems to give signs of weak recovery. In total, bank credits appear to have risen. However, all of these are what we observe at first glance. There exists a milieu of unfruitful growth. Employment loss in industrial sector prevails. And considering the small and medium sized enterprises (SMEs), the story is more complicated. As per the 2009 end figures on bank credits, credits to SMEs head down while others rise. However, SMEs are of importance considering employment. During 2008 crisis, 45 percent of employment loss throughout the USA stemmed from SMEs. Nonetheless, we are told that this [More]
    The vitality of fiscal rule
    Fatih Özatay, PhD 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. [More]
    Development gaps and institutional structure
    Fatih Özatay, PhD 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 [More]
    Independence, fiscal rule and credibility
    Fatih Özatay, PhD 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. [More]
    “Turkish firms cannot easily receive bank loans until they institutionalize”
    Güven Sak, PhD 04 March 2010
    At the beginning of the weekend we examined why people saying "I actually am quite content with the current crisis" believed so. As we know, there is a group of businessmen feeling the same way in Turkey. What were their distinctive characteristics? Their either had a wide base of working capital or the potential to expand the base of the existing working capital. Bestowing God would have favored the enterprises which do not have sufficient cash to run the business or those who have limited access to liquidity. Then, today's question should be: how can the access of the corporate sector to working capital be improved? From this point onwards, there are many rumors. It is evident that the easiest way to access working capital is to have easy access to the banking sector. But, how can the ba [More]
    Budget transparency
    Fatih Özatay, PhD 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 [More]
    Do development gaps depend on geography and culture?
    Fatih Özatay, PhD 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. [More]
    Why doesn’t Obama shout at the media?
    Güven Sak, PhD 27 February 2010
    The developments witnessed last week should be taken as an evidence for how the removal of basis for consensus in a country tangles the situation. The removal of the basis for consensus directs people towards looking askance at anyone else. This is bad; this climate is toxic. In such a climate, the responsibility does not decrease but increases for those who claim to provide resources and know the importance of not getting rid of the means and who are obsessed with making progress. Responsible agents should bring together all institutions make sure that the system functions. The public knows how to distinguish between those securing the progress and those hindering progress. For Turkey, the responsibility is undertaken by the Prime Minister under the current system of government. And for t [More]
    Which EU?
    Fatih Özatay, PhD 25 February 2010
    Which EU do we want to join? First, I want to remind you of two points: this commentary is solely on the economic realm. Second, I am not an EU expert. I started to take interest in the EU issue in 2003. So if you ask why I try to write on the EU issue, I would say that I have the courage of a person who does not know much about a particular subject. [More]
    Please fasten your seat belts
    Güven Sak, PhD 25 February 2010
    Everyone has their own problems. If you hear the parties in struggle, they have fantastic claims and they think they are right. They are telling with passion the unfair treatment they are facing. However, there appears an atmosphere where small losses in the way to victory do not count and where anything is serving to the end is lawful. The trick here is not to push the country to this mood. If the authorities responsible for the adjustment among institutions become a party, such occasions become inevitable. We have sensed this atmosphere before 1980, and it was not nice. But there is nothing we can do. If we cannot change the atmosphere fundamentally, we should deal with the steps that can be taken in the coming period to secure economic stability. Rule based fiscal policy has become more [More]