I started to write a series of commentaries on inflation targeting regime of Turkey. I mentioned some important points on Sunday and Monday. Today I will give a break and continue on Sunday from where I stopped.

The reason for this is the fuss made about the TEPAV policy note 'Export losses in the EU market'. Publicity is never bad. What is more, a part of what is said and written about this policy note is quite entertaining. Due to this reason the traditional 8.30 Friday meeting at TEPAV was highly fun. All of these are the nice aspects of the job we do; but one cannot prevent getting upset once he/she realizes how shallow our debate skills are.

Policy notes constitute the beginning of the research that is to deepen in time. They provide some diagnosis. They discuss briefly what the reasons lying behind are. Then the real work begins. Therefore a policy note can 'lead to' several research. The mean reason why the note was featured in the press more than we expected is that two points stated in the note were misunderstood. It is also interesting that a short note is not read completely or is misunderstood and assertive statements are made on this basis. Comments on the note written by Ümit Özlale and Ayşegül Dinççağ resulting from misunderstanding were generally made by sections occupied with making full court press to the Central Bank. Maybe it was this occupation that lead to the misunderstanding.

The first misunderstanding stems from the following conclusion the note made after examining the data broadly: "Thus, the hypothesis that exports to the EU are influenced by exchange rate dynamics is not supported at least for the period before and after the crisis." The note continues: "These diagnoses reveal that the export losses in the EU market cannot be solely explained through the exchange rate effect; other structural factors also play a role in this."
It must be clear that these statements do not imply that the exchange rate does not affect export performance. It only maintains that other factors such as foreign demand, long-term export strategies, transferring of funds for exports can play a role and that in some certain periods the mentioned factors can be of higher importance.

The second misunderstanding originates from the description 'axis shift.' In fact, the majority of the criticisms about the note focus on this description. The note does not use the phase in negative terms. It talks about two different shifts in axis. The first is that EU's imports from counties out of the Union increased. So, the note states that in this sense, EU's axis shifted but Turkey could not benefit from this situation. Second, it implies that, as a policy response, Turkey headed towards other markets since the EU market contracted. So, what is wrong with this?

Of course every single person does not have to like and appreciate a report. However, some conclusions reached on the basis of the data put forth the phenomena. The prevalent phenomena might disturb you. Then, do we have to neglect the phenomena? We first have to set forth the phenomena in order to design economic policies. Unfortunately, we cannot even agree on the phenomena.

This commentary was published in Radikal daily on 05.08.2010