Stuck in Between: Transforming Turkey’s Manufacturing Industry
06 December 2013
It is now a truth universally acknowledged that something very exciting -and a bit terrifying- is happening in manufacturing. After several decades of disregard, the art and science of “making things” seems to be fashionable again. With manufacturing on the rise, it is hardly surprising that industrial policy also is back. As public opinion is turning in favor of industrial policy, the odds of it being taken more seriously by politicians and policymakers are getting higher as well. This is why it is a good idea to take manufacturing strategy documents more seriously these days.
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Prospects for the Turkish economy in 2014 (1)
Fatih Özatay, PhD
05 December 2013
If you are not implementing an economic policy measure that will radically alter the inflationary outlook, changing inflation depends on luck. A change in inflation = A change in economic policy + luck’. ‘A major change in inflation = A little more change in economic policy + a lot of luck’. This was how I adapted Nobel economy prize winner psychologist Daniel Kahneman’s favorite equations (Success = Talent + Luck and Great success = a little more talent + a lot of luck) to inflation. These two equations might guide our estimations for inflation outlook in 2014. Here it goes:
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The baseline scenario for 2014 (2)
Fatih Özatay, PhD
03 December 2013
Even the FED does not initiate tapering on 17-18 December, the statements after the meeting might alter expectations on the timing and the magnitude of tapering. It’s time for an “early” baseline scenario. ‘Early’ because the scenario mainly depends on the steps the Federal Reserve (FED) will take and the FED will hold a meeting on December 17-18. It is a possibility that the FED will take the “feared” tapering decisions during its December meeting. Even if it delays the decision, the statements after the meeting might alter expectations on the timing and the magnitude of tapering. In that case I will have to update the current one with a “new baseline scenario.” Below are my assumptions for external conditions under the current circumstances:
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Now the state has seized supermarkets
Güven Sak, PhD
03 December 2013
So, who should the Venezuelan people blame? The people who try to extend their profits within a state-designed system? Not in Turkey, thank goodness. Not yet. We make do with wheeling out the “banks exploit the people via interest payments” discourse. Nothing new in Turkey. In Venezuela, however, things have completely gone out of control. The country is now paying for the mistakes made yesterday. Yesterday’s mistakes are causing even bigger mistakes today. This is the key lesson I have learned from the Venezuelan experience. The first lesson is that the state’s aversion to market prices augurs ill as it. later evolves to price manipulation and finally to price caps. The second lesson is that the state does what it does with completely good intentions. The road to hell is paved with good
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The BRSA’s decisions: Both timely and not (2)
Güven Sak, PhD
30 November 2013
So, the billion-dollar question is, why did the BRSA not step up earlier in the late 2010 or early 2011? The Banking Regulation and Supervision Agency (BRSA) has attempted critical decisions. The draft documents were released on the Agency’s webpage for public discussion. High credit growth rate is a threat to financial stability. It pushes up consumption and investment and hence the current account deficit. If the level and the growth of investment are already weak, consumption comes to the radar for intervention.
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Sanctions shifting from Iran to Turkey?
Güven Sak, PhD
30 November 2013
Let’s try to name the winter of our discontent in Ankara. With the Geneva interim agreement, we were able to see a change in the regional landscape by way of a partial respite from sanctions. A U.S.-Iran deal might lift sanctions from the region while Turkey’s potential long-range air defense deal with China could bring them back. It is good for our neighborhood for the sanctions on Iran to be lifted – it would be bad however, to see sanctions imposed on Turkish companies. It is as if the U.S. needed to maintain a set number and level of sanctions in our neighborhood at all cost. I have to confess that I have difficulty in understanding the benefits. The whole thing is more like an improvisation act getting out of hand then a full-fledged strategy. It simply possesses a downside r
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Why doesn't our higher level of income equality make us happier?
Güven Sak, PhD
29 November 2013
Turkey is one of the two OECD countries which have achieved the most rapid decrease in income gap between the rich and the poor; yet, this has not resulted in an equally successful increase in Turkey’s life satisfaction score.
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The BRSA’s decisions: Both timely and not (1)
Fatih Özatay, PhD
28 November 2013
These steps will further reduce GDP growth in 2014. From this perspective, the decisions were untimely. But when you neglect this significant delay, the decisions were in the right direction. The global crisis has proven once again that financial stability is essential. Before the crisis we believed that price stability would facilitate financial stability. But the crisis broke out in a period where the developed world enjoyed price stability and many developing countries attained radically low inflation rates compared to the 1980s and 1990s. Then it was understood that price stability did not guarantee financial stability.
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Is Turkey more equitable now?
Güven Sak, PhD
26 November 2013
In the 1960s, Turkey, Korea, and Egypt had the same GDP per capita. Should we compare ourselves with Korea and feel frustrated or should we look at Egypt and be pleased? In the previous decade, Turkey by 62 percent, the figures say. Did all income groups benefit from the growth equally? Was the process inclusive or exclusive? Has poverty increased or decreased in the meantime? Is Turkey a more equitable country today? How you formulate the question shapes the answer you get. Today I would like to talk about a recent blog post by Martin Raiser, World Bank Turkey Director, who believes that the growth process of Turkey in the last decade was inclusive. True, figures validate that Turkey is performing relatively better concerning income equality, but it is still not doing as well as South Kor
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The baseline scenario for 2014 (1)
Fatih Özatay, PhD
26 November 2013
Taking into account the current vulnerabilities facing the Turkish economy, two external determinants come to the fore: the US and Europe. It is almost the end of the year. The most popular item in the coming weeks’ agenda will be how Turkey will perform in 2014 under “normal conditions.” Please don’t get me wrong when I say “normal conditions.” Although the world economy is and will be performing under abnormal conditions, the abnormal has to be considered the normal when doing prospective analysis. Perhaps I should stick to the usual “baseline scenario” expression to avoid confusion.
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