Why loans go to shopping malls instead of students?
Fatih Özatay, PhD
12 November 2013
Why is Turkey’s financial system, which is strong and generous enough to extend million-dollar loans for shopping malls, not as generous when extending student loans? You obviously need machinery for production: turbines, turning machines, pressing machines, cranes etc. These constitute the physical capital. The level of physical capital goes up with investment. This is why we closely follow how investments change in time as it determines not only growth rate at present but also and more importantly the level of output in the future.
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Both positive and negative
Fatih Özatay, PhD
09 November 2013
Quarterly annual growth rates were so modest that cumulative nine-month figure was lower in 2013 than in 2012. In September industrial output increased by 6.4 percent year-on-year. Monthly figures have been quite volatile recently. In August, for instance, output decreased year-on-year by 1.4 percent. We should not take the monthly changes so seriously.
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Turks do not trust each other
Güven Sak, PhD
09 November 2013
I just saw a graph in OECD’s “How’s Life” showing that Turkey is the weakest among a number of countries in terms of social connections. The data comes from a Gallup World Poll. It shows the percentage of people who can count on someone to borrow money from at the last minute, like a relative or a friend. Turkey is the lowest, followed by Mexico and Greece. The highest is Iceland. The share of respondents saying that they have no relatives or friends to turn to in times of need is four times higher in Turkey than it is in Iceland and Ireland. But why? The findings are not intuitive. The presumption in Turkey is always that we might not be rich, smart or skilled, but we have strong family and friendship ties. Not so much, when compared to other OECD countries. That is bad.I remem
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Was it a translation error?
Güven Sak, PhD
08 November 2013
The amusing legitimacy debate going on in Turkey? I still want to believe that it is a misunderstanding caused by a translation error. Lately I have been thinking about explaining how the Internet economy has changed our lives by use of a solid example. On the occasion of prime minister Erdoğan’s recent amusing remark themed, “there are legitimate lives and illegitimate lives,” I want to talk about how the sharing economy today has boomed, thanks to the Internet. It has been on my mind for a long time, and here I go today. Companies of the new economy, such as Uber, Airbnb, Lyft, Sidecar, and RelayRides have been growing like crazy. The Internet has changed the organization of our lives. "Property" has become a word leftover from the previous century. The meaning of ownership has changed
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Condemned to the average
Fatih Özatay, PhD
07 November 2013
You can take a month of low inflation and proudly say “we achieved the lowest inflation ratio of the last something years” for instance. I want to share a figure; it will best illustrate what I am trying to tell. It shows monthly inflation realizations since 2009 – there is no need to go back further. The horizontal line represents the average consumer price inflation (CPI) since 2009: 7.6 percent. It is clear that the average level pulls the CPI like a magnet: the levels above and below the mean value prove temporary. The CPI fluctuates around the average line. There is a technical terms for this: mean reversion. If you jump into another literature, you come across the term “inertia” for a similar concept.
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Reduce the prices of staple foods; we can decide what to eat
Güven Sak, PhD
05 November 2013
The average Turk spends around 30 percent of his or her income on food, compared to 15 percent for the average French person. Would you like a tax system that loves you more than you love yourself, interferes in every single aspect of your life, saves you from doing bad things, and promotes good behavior? Say that the state, assuming that high-glycemic index food and beverages are detrimental to people’s health, raises taxes on such products. This would push up the prices of the high-glycemic index foods and beverages, discourage their consumption, and hence protect people from obesity. This also would mean the state regarding you as a baby, knowing what you need better then you do. It thus interferes with your lifestyle, just for your own good, of course. Would you love such a paternalist
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Don’t make promises you can’t keep
Fatih Özatay, PhD
05 November 2013
One way to end the erosion of monetary policy credibility is to state a higher CPI target. One should either keep his or her promise, or make another one that he or she can keep. There is no middle way. Yesterday inflation figures for October were released. Consumer price inflation (CPI) was recorded at 7.7 percent. More importantly, headline inflation (l indicator) reached as high as 7.5 percent, significantly above the average in recent years.
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The inscription on FX notes
Fatih Özatay, PhD
02 November 2013
If the sum of consumption and investment is higher than the GDP, current account will be negative, implying that the country did not spend according to its means and hence had a current account deficit.
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What is the significance of the Marmaray Project?
Güven Sak, PhD
02 November 2013
The first phase of the Marmaray Project was officially opened on Oct. 29. That is an important date – the 90th anniversary of the proclamation of the Republic of Turkey. But the event once again has shown how polarized Turkish society is at the moment. Just follow the Twitter activity around it and you’ll see the division between those who consider it a centennial event and the ones who are trying to diminish its significance. But that is not what struck me the most. After all, I am now used to it in Turkey. What struck me is the empty rhetoric of the official explanations. There is a kind of “It’s a bird, it’s a plane” mood in the air, but nobody concludes the trio of my childhood days with “It’s Superman.” People aren’t sure of what to make of the Marmaray. I see a problem in
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What does it mean to have had five education ministers in one decade?
Güven Sak, PhD
01 November 2013
Why is education system reform crucial for Turkey? Simply because the current system is poor, bringing Turkey only meager PISA scores. You might think that I am obsessed with this “five ministers in a decade” deal, but I am not the obsessed one here. It was a McKinsey study titled “How the World’s Best-performing Schools Come out on Top.” The study, conducted in 2007, reviewed and compared approximately 20 of the world’s school systems, including those ranked among the top performer schools in PISA. In conclusion, they identified eight key points for reforming education systems. Stability was found to be the most important factor to take into account: the average education system reform takes six years. In countries that succeeded at economic reform, administrative actors and political act
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