tag:blogger.com,1999:blog-338506572024-02-18T22:26:50.124-08:00The Turkish Economy BlogComments, Analysis, Data, and News on Turkish Economytugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-33850657.post-85290932403147822762007-06-11T12:26:00.000-07:002007-06-11T12:44:29.499-07:00McKinnon on Argentina’s Monetary Regime<span style="font-family:courier new;"><blockquote><p><span style="font-family:courier new;"><em>"Argentina’s initial massive depreciation, as measured from the third quarter of 2001 to the second quarter of 2002, was 275 percent—as shown in figure 1. Then by mid 2003, the nominal exchange rate had bounced back somewhat to a depreciation of just 200 percent (from 3Q 2001) and has subsequently remained remarkably stable. Since 2002, the nominal exchange rate has remained at 3 pesos per U.S. dollar, ± 3 percent....If one presumed that the pre-crisis exchange rate in early 2001 was roughly at purchasing power parity, then a sustained 200 percent devaluation (the value of the dollar rises from 1 to 3 pesos) will eventually show up as a 200 percent increase in the domestic price level. Producer prices, which are more directly affected by the exchange rate, will react faster than consumer prices. And by early 2007, producer prices have already risen more than 180 percent while consumer prices rose by just 90 percent. Thus, at 3 pesos to the dollar, Argentina faces several more years of substantial inflation in its CPI before the fixed nominal exchange rate eventually ends it. "<br /><br />"Korea followed a somewhat different monetary cum exchange rate policy. Following its great crisis of late of 1997-98. To be sure, Korea’s crisis was less intense than what Argentina experienced four years later — at least as measured by the initial depreciation, where the won per dollar rate rose “just” 85 percent (figure 3).... However, the big difference between the two countries in their post-crisis experiences is that Korea opted not to stabilize the nominal value of the won at a highly depreciated level, as Argentina did. Rather the Bank of Korea opted to let the won continue appreciating, albeit somewhat erratically, as shown in figure 3. "<br /></em><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXAKmqKgjZzGzSWTIBXACmiDdUIHMbAspv-_9SlBeeK3gZXMDfdt7jLzmJIWUw9S10plsNH3uYS4jUNRuXeby3BaBveUVR3Lqfv4tHgEd6bLhhuLTs-Xb60UtL4O5cZaUYDIKLkw/s1600-h/untitled4.jpg"><img id="BLOGGER_PHOTO_ID_5074892880482668578" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXAKmqKgjZzGzSWTIBXACmiDdUIHMbAspv-_9SlBeeK3gZXMDfdt7jLzmJIWUw9S10plsNH3uYS4jUNRuXeby3BaBveUVR3Lqfv4tHgEd6bLhhuLTs-Xb60UtL4O5cZaUYDIKLkw/s400/untitled4.jpg" border="0" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRJElggM01RoVeE2KcGAD3yzb2CuduX9duoSc88T-w9x6kpcVHfB0wt1PmvaPdlJMn-NmGSkXspa2apYDIaoJJLztPl6ADgBo-znTQ14FUOtzHGuE6L3voTtBsTtDZ4Qj96uwMgQ/s1600-h/untitled5.jpg"><img id="BLOGGER_PHOTO_ID_5074892880482668594" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRJElggM01RoVeE2KcGAD3yzb2CuduX9duoSc88T-w9x6kpcVHfB0wt1PmvaPdlJMn-NmGSkXspa2apYDIaoJJLztPl6ADgBo-znTQ14FUOtzHGuE6L3voTtBsTtDZ4Qj96uwMgQ/s400/untitled5.jpg" border="0" /></a><br /></span></p></blockquote></span><br />What about Turkey? To understand the rate of change in variables, the graph below is in log terms. "Energy" represents the cost of energy imports.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH2pda4TWi3d3EdbfwAlBZMYEuAHhstT-TxvXciuazq6v-C-3-Mzs9MKHPClS7i5dmyXjt0Nl14uDKOHG2OHxBRos73hJqWJ3PrnqyEK8KIRjJZWkYFDK_2HmCVNigWSP8jV0P7w/s1600-h/untitled2.jpg"><img id="BLOGGER_PHOTO_ID_5074894611354488914" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH2pda4TWi3d3EdbfwAlBZMYEuAHhstT-TxvXciuazq6v-C-3-Mzs9MKHPClS7i5dmyXjt0Nl14uDKOHG2OHxBRos73hJqWJ3PrnqyEK8KIRjJZWkYFDK_2HmCVNigWSP8jV0P7w/s400/untitled2.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com4tag:blogger.com,1999:blog-33850657.post-50535735793595292522007-06-07T17:57:00.000-07:002007-06-07T18:00:32.642-07:00Fast and Furious !The average growth rate in the last 5 years was the fastest since 1960. Is this a structural shift or a transient phase?<br /><br /><u><span style="font-family:courier new;"><span style="font-size:85%;"><strong>Figure: Growth Rate of GDP per capita</strong> </span></span></u><br /><u><span style="font-family:courier new;"><span style="font-size:85%;"><br /></span></span></u><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioZ7IzWz23eFwy3rWGUtJTL5XBKtTBGQbVwm802FBZ-KOZmXiEi_RBlNDCZhU4wi1_3awVqdspjGccg-OlguKgYWJje54DWziJj7HHbfB8fAU-2AxgmSeyYG09E_dZZXzWlRj2IQ/s1600-h/untitled2.jpg"><img id="BLOGGER_PHOTO_ID_5073491406884179970" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioZ7IzWz23eFwy3rWGUtJTL5XBKtTBGQbVwm802FBZ-KOZmXiEi_RBlNDCZhU4wi1_3awVqdspjGccg-OlguKgYWJje54DWziJj7HHbfB8fAU-2AxgmSeyYG09E_dZZXzWlRj2IQ/s400/untitled2.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com1tag:blogger.com,1999:blog-33850657.post-35597556150677067262007-06-07T17:41:00.000-07:002007-06-07T21:48:30.302-07:00What Lies Beneath?If you are looking for the culprit of Turkey's trade deficit, the figure below may give you a clue... Keep in mind that the economy contracted significantly in 1994, 1999, and 2001.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcwugb1pZPj4HiDFED1Yd5JrvEqKJSOfjehQHEyaHHtFTTji9S3ATdyMzvyIdhQ5FAJwGSXlfyjTt6ZqGZque8DujXPFogjUDE_JKv9Gq7rDdfB9ywE1VlL14kUkn1HogZJJu2bg/s1600-h/untitled2.jpg"><img id="BLOGGER_PHOTO_ID_5073489255105564658" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcwugb1pZPj4HiDFED1Yd5JrvEqKJSOfjehQHEyaHHtFTTji9S3ATdyMzvyIdhQ5FAJwGSXlfyjTt6ZqGZque8DujXPFogjUDE_JKv9Gq7rDdfB9ywE1VlL14kUkn1HogZJJu2bg/s400/untitled2.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com1tag:blogger.com,1999:blog-33850657.post-53816230623960077622007-06-07T17:38:00.000-07:002007-06-07T17:41:22.911-07:00Economy is Creating Jobs - But Not Everywhere !<span style="font-family:courier new;font-size:85%;"><strong><u>Figure 1: URBAN POPULATION ... Ratio of employed people to 15 years old and older population</u></strong></span><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwumMI6xnnw-Hjw1RcN1XuVnzUoOJVdWYwNRZYFG2VOXXidOTgMejz8ZZiD37ubMhAcR3FmeYbcdTsGAxM5Cnc4aMWMgKbEy5wiwDDNU5tC5KygmfNvGlv77xwVKaO12Cd4gUlSw/s1600-h/untitled1.jpg"><img id="BLOGGER_PHOTO_ID_5073486905758453698" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwumMI6xnnw-Hjw1RcN1XuVnzUoOJVdWYwNRZYFG2VOXXidOTgMejz8ZZiD37ubMhAcR3FmeYbcdTsGAxM5Cnc4aMWMgKbEy5wiwDDNU5tC5KygmfNvGlv77xwVKaO12Cd4gUlSw/s400/untitled1.jpg" border="0" /></a><br /><br /><strong><u><span style="font-family:Courier New;font-size:85%;"></span></u></strong><br /><strong><u><span style="font-family:Courier New;font-size:85%;"></span></u></strong><br /><span style="font-family:courier new;font-size:85%;"><u><strong>Figure 1: RURAL POPULATION ... Ratio of employed people to 15 years old and older population</strong></u></span><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwtyLeRej5qCjOzmxGlcZT71GnKTDZaL2en97DDRgUs2cSHPsYCFtisXvORo2dIERJsBbFt4Pc413pqwzlYlIYdQDoletY2h3vWEyZUvySqu-wnVF33J7RHTo4FW1t_vjdTPNRRw/s1600-h/untitled2.jpg"><img id="BLOGGER_PHOTO_ID_5073486905758453714" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwtyLeRej5qCjOzmxGlcZT71GnKTDZaL2en97DDRgUs2cSHPsYCFtisXvORo2dIERJsBbFt4Pc413pqwzlYlIYdQDoletY2h3vWEyZUvySqu-wnVF33J7RHTo4FW1t_vjdTPNRRw/s400/untitled2.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-86420370517601631552007-06-07T16:14:00.000-07:002007-06-07T17:25:56.829-07:00What is Wrong with Inflation?<blockquote><p><span style="font-family:courier new;font-size:85%;"><a href="http://www.fxstreet.com/fundamental/economic-indicators/turkey-finally-some-good-news-on-inflation/2007-06-04.html"><strong><span style="font-size:130%;">Turkey: Finally some good news on inflation</span></strong> </a></span></p><p><span style="font-family:courier new;font-size:85%;">"Turkey’s State Institute of Statistics has published the May inflation numbers. Turkish consumer prices (CPI) came out at 9.23% y/y (0.50% m/m) - below the consensus expectation of 9.6% y/y. Similarly, producer prices (PPI) were up 7.14% y/y (0.39% y/y) in May - also below the consensus expectation of 7.4% y/y. The downward surprise on CPI mostly reflects lower-than-expected food prices. Over the last couple of months food prices have surprised a bit on the upside - in May we saw a bit of a “mean-reversion” in the food prices.<br /><br />Overall, this is good news and inflation should drop further in the coming months, but inflation is still likely to remain elevated and significantly above the Turkish central bank’s (TCMB) official inflation target of 4% by the end of the year. We now see inflation around 7-7½% by the end of the year. " </span></p></blockquote>Is that so?<br /><br />Both CPI and core CPI figures declined in May. The problem is that if we look at other "core inflation measures" like median CPI and trimmed mean, we don't observe any downward trend. On the contrary, the trend is upwards. It seems that the recent drop in inflation owes too much on volatile food prices (which happen to decrease in May).<br /><br />The inflation report is at best "good news" with an asterix.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEVk7IcjXZ9TInjzHAnwKbCG5jmY8wjPP8Asrquu52NR62NVebiUoFxOiYRYViRrX_-XEfPGITfQUs1Q5RyuzPKiKL44mwSnBA0KKbiERQZBbG50f0E60cHOF8_c2JYnK7sAbWwg/s1600-h/q6.jpg"><img id="BLOGGER_PHOTO_ID_5073466015037525938" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEVk7IcjXZ9TInjzHAnwKbCG5jmY8wjPP8Asrquu52NR62NVebiUoFxOiYRYViRrX_-XEfPGITfQUs1Q5RyuzPKiKL44mwSnBA0KKbiERQZBbG50f0E60cHOF8_c2JYnK7sAbWwg/s400/q6.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-33771971330345402372007-06-07T15:37:00.000-07:002007-06-07T17:26:19.556-07:00Are We There Yet ? (2)The Republic of Turkey has been a "developing" country from the day it established in 1923. Are getting closer to be a "developed" one?<br /><br />Let's have a closer look at 1980-2006 period. The first graph compares the growth performance of the Turkish economy with the rest of the world:<br /><br /><u><strong><span style="font-family:courier new;font-size:85%;">Figure 1: Average Growth Rate</span></strong><br /></u><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6GPFrzLQX4UTuKF9mQOb3EZMUfbAAJKa04FM1VqFNX2K0bO2x6ndH6I-dRbk4DkOwFCAe9AMFYv3zANBTwrTGNmtleP0C5fAdexfJAY5S4TUIER0cTP8zfqR5dPh26V97VfWx-A/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073457081505550146" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6GPFrzLQX4UTuKF9mQOb3EZMUfbAAJKa04FM1VqFNX2K0bO2x6ndH6I-dRbk4DkOwFCAe9AMFYv3zANBTwrTGNmtleP0C5fAdexfJAY5S4TUIER0cTP8zfqR5dPh26V97VfWx-A/s400/1.jpg" border="0" /></a><br /><br />It is clear that after a brief period of "above-average" performance following the free market reforms in the early 80s, the Turkish economy fell into a "growth recession" through the 90s. Following the 2001 crisis, the economy has recovered considerably and experienced a 7.2% growth rate.<br /><br />What is remarkable is that the acceleration in groth rate has been achieved despite the negative shocks in the terms of trade. In the early 80s, the export prices increased, on the average, 2.1% (per year) faster than import prices - which mean that by 1988, the export prices were, in cumulative terms, almost 20% higher as compared to import prices.<br /><br />In the 2000s, on the other hand, due to rise in energy and commodity prices, the terms of trade have deteriorated (on the average) 1.3% per year. The cumulative change was 8% by 2006.<br /><br />Asia and East Europe have suffered too, albeit less severe than Turkey. All other developing countries in Africa, Middle East, and South America have experienced a positive shock.<br /><br /><u><strong><span style="font-family:courier new;font-size:85%;">Figure 2: Average Change in Terms of Trade (negative numbers indicate a deterioration)</span> </strong><br /></u><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguc5Ox3Q98lwX6jMHr4ERQmDlBHcWtgyfZynU4jlJuO6rkUqItcEDex8fPQbpEHQcCrALHE8a6p6_JL1SOmm_cR14mgyzjyh36144aSjAv5pMYGGl9xV0L9ZRl9UH7P7kdCTQzpA/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073458464485019474" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguc5Ox3Q98lwX6jMHr4ERQmDlBHcWtgyfZynU4jlJuO6rkUqItcEDex8fPQbpEHQcCrALHE8a6p6_JL1SOmm_cR14mgyzjyh36144aSjAv5pMYGGl9xV0L9ZRl9UH7P7kdCTQzpA/s400/1.jpg" border="0" /></a><br /><br /><strong><span style="font-family:courier new;font-size:85%;"><u>Figure 3: Average Change in Terms of Trade (negative numbers indicate a deterioration)</u></span></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrcHyaltobpDR3eqqr87oU0riDoDWMFV3SggsNRqdtBrfUQotJkfQ52IDxE7Rzftg9-KGEOWnMNniRruAdayIs_9ng-bhpl0H92ZLZAlTbzojA2CCtDeroYDIryXL-s070SbXtzw/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073458606218940258" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrcHyaltobpDR3eqqr87oU0riDoDWMFV3SggsNRqdtBrfUQotJkfQ52IDxE7Rzftg9-KGEOWnMNniRruAdayIs_9ng-bhpl0H92ZLZAlTbzojA2CCtDeroYDIryXL-s070SbXtzw/s400/1.jpg" border="0" /></a><br /><br />Therefore, it is not surprising to observe the deterioration in the current account balances of Turkey. Note that East Europe has also relied on foreign capital flows to finance its growth rate. Asia, on the other hand, has continued to increase its current account surplus thanks to rise in national savings:<br /><br /><u><strong><span style="font-family:courier new;font-size:85%;">Figure 4: Average Current Account Balances (negative numbers indicate current account deficits) </u></span></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-Jsl2d_zqAA-_-GTPtVLlGKbYCyrROwqIsqKD61yirODdqyXI1swDKq7bwBAIxIC-WbinQ3QkS_QUMrUG2fbxEVxLMHmqWP3YBD3mjOY8crZXe6ui4NVG41JWyLvRkWw-Yj2VnA/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073462445919702914" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-Jsl2d_zqAA-_-GTPtVLlGKbYCyrROwqIsqKD61yirODdqyXI1swDKq7bwBAIxIC-WbinQ3QkS_QUMrUG2fbxEVxLMHmqWP3YBD3mjOY8crZXe6ui4NVG41JWyLvRkWw-Yj2VnA/s400/1.jpg" border="0" /></a><br /><br /><u><strong><span style="font-family:courier new;font-size:85%;">Figure 5: Average Savings Rate (percent of GDP) </u></span></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_GKCm0C7FWepj-6EzVbGNYd0OqKwfoxMy2pHY3jM2pQpax97O5weNrXpfkoBllcyy2HNogWc_xXrKxMWlwqwWbW39i9DS5QaWUEVivF9P-vOMM_hMA9hShV5rktqnam4DIA08hg/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073462922661072786" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_GKCm0C7FWepj-6EzVbGNYd0OqKwfoxMy2pHY3jM2pQpax97O5weNrXpfkoBllcyy2HNogWc_xXrKxMWlwqwWbW39i9DS5QaWUEVivF9P-vOMM_hMA9hShV5rktqnam4DIA08hg/s400/1.jpg" border="0" /></a><br /><br />What is important is that the Investment-growth ratio, which was peaked at the end of 90s, has declined recently and in par with other developing countries.<br /><br /><u><strong><span style="font-family:courier new;font-size:85%;">Figure 6: The ratio of Investment/GDP to Growth Rate (ten year moving average) </u></span></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5gFwwdZibCBMTyIkKqjzj9oG_fqNGA3GMRviVi_RGMOi02XcIXBuqXB291NbOluUtNLqOjBZRYF5yMeihYeiKcDzAlQe5qyxYiO9YoQy9-h6yjdjX5YEbY-K5V4HFzwLvjDFslA/s1600-h/1.jpg"><img id="BLOGGER_PHOTO_ID_5073463244783620002" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5gFwwdZibCBMTyIkKqjzj9oG_fqNGA3GMRviVi_RGMOi02XcIXBuqXB291NbOluUtNLqOjBZRYF5yMeihYeiKcDzAlQe5qyxYiO9YoQy9-h6yjdjX5YEbY-K5V4HFzwLvjDFslA/s400/1.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com1tag:blogger.com,1999:blog-33850657.post-77873396186979982992007-05-28T15:34:00.000-07:002007-05-28T20:06:58.565-07:00Are We There Yet?Turkey is a developing country. We all agree on that. In her quest to become a developed country, is she getting closer to her goal? Diagrams below may give you an idea.<br /><br />Using PPP GDP per capita figures, I normalized the income level of countries with respect to Turkey (i.e. by setting Turkey's income per capita as one). In the first figure, we compare the economic development of Turkey with three of her peers in the early 1900s: Greece, Portugal and Spain.<br /><br />In 1913, all three were richer: Spain by 120%, Greece by 70% and Portugal by 45%. On the average, income per capita in these countries were 78 percent higher than that of Turkey.<br /><ul><li>Fast-forwarding to 1950, the difference is almost the same: 75%. </li><br /><li>In the 50s, Turkey was able to get closer a little bit. </li><br /><li>But in the 60s and 70s, Turkey was not able to keep pace with the three and fell behind. </li><br /><li>In 1980, they were almost 3 times richer.</li><br /><li>In the 80s, the gap shrunk again - to 2.79.</li><br /><li>Following the "lost decade" of 90s (which can be characterized by an ever-lasting political and economic uncertainty in Turkey), Greece, Portugal, and Spain are 2.79 times richer.</li></ul><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHVDdDZ25ss4YqAq7weII5I07tiT81DMQPHKMtuTd8BAK99_ENz5cpbfuq8544lRy16Y36aSHXvNY_nzXkCs_vHFO6cATT-w0e-26hPlvlnu9TYT5L2mZSp7DCJQkWsWayTZTKpA/s1600-h/q1.jpg"><img id="BLOGGER_PHOTO_ID_5069745823766298098" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHVDdDZ25ss4YqAq7weII5I07tiT81DMQPHKMtuTd8BAK99_ENz5cpbfuq8544lRy16Y36aSHXvNY_nzXkCs_vHFO6cATT-w0e-26hPlvlnu9TYT5L2mZSp7DCJQkWsWayTZTKpA/s400/q1.jpg" border="0" /></a><br /><br /><strong><span style="font-size:85%;">Figure 1: Income per capita (PPP) - Turkey vs. Greece, Spain, and Portugal</span></strong><br /><br /><strong><span style="font-size:85%;"></span></strong><br /><br />The other diagrams compare Turkey with Europe, South America, Asia and Pacific.<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTxpEAJJ1b07tK2m3Wq-AxClWFsGm5eycPuDx2AWFHDqtrwK3K4ElXGR8v392-G-pPufQFUgyvMEfPu1v2HrMLQTqMi4vu1ht10k5B5plXM2w7mJ7dROLQVL3kxCFRPfPtPA8NKw/s1600-h/q2.jpg"><img id="BLOGGER_PHOTO_ID_5069745828061265410" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTxpEAJJ1b07tK2m3Wq-AxClWFsGm5eycPuDx2AWFHDqtrwK3K4ElXGR8v392-G-pPufQFUgyvMEfPu1v2HrMLQTqMi4vu1ht10k5B5plXM2w7mJ7dROLQVL3kxCFRPfPtPA8NKw/s400/q2.jpg" border="0" /></a><br /><br /><strong><span style="font-size:85%;">Figure 2: Income per capita (PPP) - Turkey vs. Europe</span></strong><br /><br /><strong><span style="font-size:85%;"></span></strong><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6WEVfGHy7QfP3bwpuBypgariluRkJWUFHt60MPDu7SaQbp4yzaOZcF8LdoZlTcCeygElS9V-Dy0MkOBQvc9uThqGtr8ef_AQHzg5yHV_jN5794g9dtCB_-OVVXrLm-fc_xKxr2A/s1600-h/q3.jpg"><img id="BLOGGER_PHOTO_ID_5069745828061265426" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6WEVfGHy7QfP3bwpuBypgariluRkJWUFHt60MPDu7SaQbp4yzaOZcF8LdoZlTcCeygElS9V-Dy0MkOBQvc9uThqGtr8ef_AQHzg5yHV_jN5794g9dtCB_-OVVXrLm-fc_xKxr2A/s400/q3.jpg" border="0" /></a><br /><br /><strong><span style="font-size:85%;">Figure 3: Income per capita (PPP) - Turkey vs. South America</span></strong><br /><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeSUn2b3fwwopLbPCguj_BfaAbqzX0KD9YjWXNY3Os57V_suD-ydXNk0GX3nBZ68CKiWWxf5Y2itvj5pHjpUCRqDTMktkakU0psekztdbRJXh7CFBIPSDzifYjIZYStAbBAX1Wxg/s1600-h/q4.jpg"><img id="BLOGGER_PHOTO_ID_5069745832356232738" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeSUn2b3fwwopLbPCguj_BfaAbqzX0KD9YjWXNY3Os57V_suD-ydXNk0GX3nBZ68CKiWWxf5Y2itvj5pHjpUCRqDTMktkakU0psekztdbRJXh7CFBIPSDzifYjIZYStAbBAX1Wxg/s400/q4.jpg" border="0" /></a><br /><strong><span style="font-size:85%;">Figure 4: Income per capita (PPP) - Turkey vs. Asia</span></strong><br /><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkeP33iBkFAVdfhLZaWrPBozgWwYSkV6UsAOQh1_BzghEjkAIUA8QYcOUp2gV4ZldqWPmb7T_PZcGmjnE2Qu2WlsuW-O6JQYIzmQzc8t8535HrUv0HUFK_E5jA4Wxl7o_8Xr_YYA/s1600-h/q5.jpg"><img id="BLOGGER_PHOTO_ID_5069810566103318082" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkeP33iBkFAVdfhLZaWrPBozgWwYSkV6UsAOQh1_BzghEjkAIUA8QYcOUp2gV4ZldqWPmb7T_PZcGmjnE2Qu2WlsuW-O6JQYIzmQzc8t8535HrUv0HUFK_E5jA4Wxl7o_8Xr_YYA/s400/q5.jpg" border="0" /></a><br /><strong><span style="font-size:85%;">Figure 5: Income per capita (PPP) - Turkey vs. Pacific</span></strong><br /><p></p><p></p><p>In the last graph, we compare income per capita of Turkey with the 38 countries. It seems that we are not there yet...</p><p><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiri2jG1P3M06EuWQnPDsHLkmJx2oLCQD9q7m6X93DXyNEEehB4LgqRqxnNUC5zvHNAEpgdsr6dEZd4LVOYPpALAYWgelz79q7PdEZLATa2wXJdMwHma4jU-OkdVd0hOljgLqfWLA/s1600-h/q6.jpg"><img id="BLOGGER_PHOTO_ID_5069810570398285394" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiri2jG1P3M06EuWQnPDsHLkmJx2oLCQD9q7m6X93DXyNEEehB4LgqRqxnNUC5zvHNAEpgdsr6dEZd4LVOYPpALAYWgelz79q7PdEZLATa2wXJdMwHma4jU-OkdVd0hOljgLqfWLA/s400/q6.jpg" border="0" /></a></p><strong><span style="font-size:85%;">Figure 5: Income per capita (PPP) - Turkey vs. Pacific</span></strong><br /><br /><span style="font-size:85%;"><em>_________________________________________________</em></span><br /><span style="font-size:85%;"><em>Data Set:</em></span><br /><span style="font-size:85%;"><em>1. Angus Maddison (‘Monitoring the World Economy 1820-1992’, OECD 1995). </em></span><br /><span style="font-size:85%;"><em>2. </em></span><a href="http://pwt.econ.upenn.edu/php_site/pwt62/pwt62_form.php"><span style="font-size:85%;"><em>Penn World Table </em></span></a><br /><span style="font-size:85%;"><em>3. </em></span><a href="http://www.imf.org/external/pubs/ft/weo/2007/01/data/index.aspx"><span style="font-size:85%;"><em>World Economic Outlook Database, April 2007</em></span></a><a href="http://www.imf.org/external/pubs/ft/weo/2007/01/data/index.aspx"> </a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com2tag:blogger.com,1999:blog-33850657.post-29445376126951431992007-03-06T15:00:00.000-08:002007-05-28T20:00:56.880-07:00It's the oil, stupid!Turkey has been experiencing a significant trade deficit since 2003. Is it because the country imports too much and/or exports too little due to appreciation of the local currency?<br /><br />Two tables below explain the problem. The main culpit is the high energy prices. The ratio of manufacturing exports to intermediate goods has never been higher. Ditto for the export/import ratio -- IF ONE EXCLUDES ENERGY BILL.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizIdu6lh45qNjnLP5DdAqJAVR612rKJeybNADml2dfe7jutLleBddA8Zgcxw89pon9RSmNSY7g_7DZv9zbscHMJHUpyy5vymvbIKIMw2LkkHOPbI1UJTWUTgGJ4DaJ9Cvqos1O5Q/s1600-h/qq1.gif"><img id="BLOGGER_PHOTO_ID_5038951332500936178" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEizIdu6lh45qNjnLP5DdAqJAVR612rKJeybNADml2dfe7jutLleBddA8Zgcxw89pon9RSmNSY7g_7DZv9zbscHMJHUpyy5vymvbIKIMw2LkkHOPbI1UJTWUTgGJ4DaJ9Cvqos1O5Q/s400/qq1.gif" border="0" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSL1I5NFEAZ3-dxfziDS_PETRCt5BvGXG3XIIoKM7VlbtMFFVnfJx1QnkNHM5xZuTq9GgiE1kFL6PmYkNzkdnwOIkzlSAYlho2lrPWqOeUm88afNrSiYEUlewUHzvHtuB6eOX14A/s1600-h/qq2.gif"><img id="BLOGGER_PHOTO_ID_5038951336795903490" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiSL1I5NFEAZ3-dxfziDS_PETRCt5BvGXG3XIIoKM7VlbtMFFVnfJx1QnkNHM5xZuTq9GgiE1kFL6PmYkNzkdnwOIkzlSAYlho2lrPWqOeUm88afNrSiYEUlewUHzvHtuB6eOX14A/s400/qq2.gif" border="0" /></a><br /><br />If there we no change in the energy prices, the ratio of exports to imports would be much better:<br /><br /><strong>Figure: The ratio of exports to imports under 2000 prices</strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiK-aUIAqE4D_QzwmtcoKyMrHMzB_gNJJh1RyLrNsjwWDHIUvMnPFOBVwsO0fDiQ4zOB6P9E7obI4bc72mQ9HbI8m8rCgIuZUPe5utRwee7wyzs2JCK9-VywyOrcdyC2wkNK0imtA/s1600-h/untitled13.gif"><img style="cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiK-aUIAqE4D_QzwmtcoKyMrHMzB_gNJJh1RyLrNsjwWDHIUvMnPFOBVwsO0fDiQ4zOB6P9E7obI4bc72mQ9HbI8m8rCgIuZUPe5utRwee7wyzs2JCK9-VywyOrcdyC2wkNK0imtA/s400/untitled13.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5038952689710601746" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com1tag:blogger.com,1999:blog-33850657.post-76617227703483374862007-03-06T14:50:00.000-08:002007-05-28T20:01:36.800-07:00The Turkish Economy - Recent Developments (2)Public borrowing constitutes a heavy burden on the financial system. One reason is the under-developed nature of the Turkish capital market. Financial deepening of the system as measured by broad money supply M2Y (which comprised of both domestic currency and foreign exchange deposits) was 28 percent of GDP in 1989 and stayed around 30-35 percent throughout 1990s despite financial liberalization in 1989. Following the economic reform program in 2001, M2Y/GDP ratio has risen gradually and reached to 50% in 2006. The ratio of the domestic debt to M2Y has declined, but it still above the pre-2001 level. Domestic cash debt (i.e. debt excluding to public institutions) is 74%. Net domestic borrowing is almost nill, thanks to fiscal austerity and privatization revenues. Gross domestic borrowing, on the other hand, is at pre-1994 level.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAbLxjuesStWuXPnCmI3ahQyNL0doawZuUC0MFK_MqzlJ1EW0qvzj1Q64GU3-weDY5NJ2-7bYHajRySAKNnTwrNcJM033-6APApnGgRDwHsDQyhkvlJ16UPQF_JGGbcLHELqrVeQ/s1600-h/qq1.gif"><img id="BLOGGER_PHOTO_ID_5038947797742851538" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAbLxjuesStWuXPnCmI3ahQyNL0doawZuUC0MFK_MqzlJ1EW0qvzj1Q64GU3-weDY5NJ2-7bYHajRySAKNnTwrNcJM033-6APApnGgRDwHsDQyhkvlJ16UPQF_JGGbcLHELqrVeQ/s400/qq1.gif" border="0" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiX7Ww4plJmjEEUujncaST_K0w6QBIi-FG5Z85E3Rne4YCQ_aj7xyRISQ7WJMAtJ9l5YLT_49Css1yNqSRxuvcKsww2-R2Hdd_pi9rlSuNKZ_8XpDSW-lAL4IRTzbfSXJ3tfkfjow/s1600-h/qq2.gif"><img id="BLOGGER_PHOTO_ID_5038947797742851554" style="CURSOR: hand" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiX7Ww4plJmjEEUujncaST_K0w6QBIi-FG5Z85E3Rne4YCQ_aj7xyRISQ7WJMAtJ9l5YLT_49Css1yNqSRxuvcKsww2-R2Hdd_pi9rlSuNKZ_8XpDSW-lAL4IRTzbfSXJ3tfkfjow/s400/qq2.gif" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-3280076837269117772007-03-06T14:44:00.000-08:002007-05-28T20:02:19.986-07:00The Turkish Economy - Recent Developments (1)The fragility of the economy to external shocks was tested in May 2006, when a turmoil in the global financial markets caused local interest rates to rise from 13 percent to 23 percent coupled with 30 percent devaluation in Turkish Lira. The Central Bank responded with a 425 basis point interest hike. After a brief spike to double digits, inflation has returned to pre-May levels at 9 percent. The Lira has recovered most of its previous loses towards the end of the year. Yields on short term treasury, however, remain high and real interest rates, 12 percent at the start of 2007, are still 600 basis points above pre-May levels.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOCqTC3JBt9wqeYBV9yJAGh5VewmvOmmETZ04EACRu-_bOqDs19dUJ2le41NJfLIu9a3ZDcHWadeAsLmppJPRTNn2145hPQ28oQFhKXH7lu7E5lBSBayRhkHsqFTa_mRgPz_rCng/s1600-h/qw2.gif"><img style="cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOCqTC3JBt9wqeYBV9yJAGh5VewmvOmmETZ04EACRu-_bOqDs19dUJ2le41NJfLIu9a3ZDcHWadeAsLmppJPRTNn2145hPQ28oQFhKXH7lu7E5lBSBayRhkHsqFTa_mRgPz_rCng/s400/qw2.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5038946590857041346" /></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhquEK_1usTavMVZ50dClMFKcpyaSNVli0_w_QPJyc6iTRVslghnHMRT7pXNq6HDEqqQqnwhGo-8w74q5pdVAd2Tao0-wEcG0S_NeVyql-R9y1981VxyZ0x1bumylxDlo5CDLS9uQ/s1600-h/qw1.gif"><img style="cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhquEK_1usTavMVZ50dClMFKcpyaSNVli0_w_QPJyc6iTRVslghnHMRT7pXNq6HDEqqQqnwhGo-8w74q5pdVAd2Tao0-wEcG0S_NeVyql-R9y1981VxyZ0x1bumylxDlo5CDLS9uQ/s400/qw1.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5038946264439526834" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1164212087849490992006-11-22T08:12:00.000-08:002007-05-28T20:02:41.681-07:00State of the Turkish Economy<a href="http://photos1.blogger.com/blogger/2282/3686/1600/aaa1.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/aaa1.png" border="0" /></a><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/aaa2.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/aaa2.png" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1163553652464588232006-11-14T17:13:00.000-08:002007-05-28T20:03:33.596-07:00Decomposition of Capital Inflows and Interest Rates in Turkey<a href="http://photos1.blogger.com/blogger/2282/3686/1600/22.gif"></a><br />Graphics below show<br /><ul><li>the total capital inflows to Turkey (as % of GDP, 12 month moving average, left axis), </li><li>decomposition of inflows (as % of GDP, 12 month moving average, left axis)</li><li>the real interest rates in Turkey (in $ terms, ex-post, 12 month moving average, including currency appreciation, in right axis).</li></ul><a href="http://photos1.blogger.com/blogger/2282/3686/1600/3.2.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/3.2.png" border="0" /></a><br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/22.0.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/22.0.png" border="0" /></a><br /><strong>Notes</strong>:<br /><strong>(1)</strong> <u>interest rate:</u> dollar terms, ex-post, right axis<br /><strong>(2)</strong> <u>capital flow:</u> as % of gdp, left axis<br /><strong>(3)</strong> <u>government borrowing</u> (% of gdp, left axis, bonds issued abroad, IMF credits, other credits --- excluding Treasury domestic borrowing securities)<br /><strong>(4)</strong> <u>hot money linked to interest rates</u> (% of gdp, left axis, Treasury domestic borrowing securities, short term borrowing of banks, short term borrowing of other sectors, deposits, net errors and omissions, excluding stock purchases)tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1163391616041293112006-11-12T20:13:00.000-08:002007-05-28T20:04:08.305-07:00The OutlookThe graph below depicts the 3-month moving average changes in exports, imports, and industrial production.<br /><br />Following the interst hikes of the Central Bank in June, there are signs of slowdown in consumption. The industrial production piked in July and has been gradually lost momentum ever since. If the exports remain strong, the economy may end up with a 5-6 percent growth for the second half of the year. Otherwise I expect a 3-4 % growth.<br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/1.2.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/1.2.png" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1163390519223191942006-11-12T19:59:00.000-08:002007-05-28T20:04:24.334-07:00The History of TL/$ Exchange RateThe graph below shows the TL/$ exchange rate (in today's prices) for the last 40 years.<br /><br />It is funny to see that the current value of TL is the same as what it was in 1965.<br />Somethings Never Change in Life.<br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/fx.gif"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/fx.png" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1159143228321925132006-09-24T17:02:00.000-07:002007-05-28T20:04:46.958-07:00Current Account Deficit in TurkeyIn his weekly briefing at <a href="http://www.morganstanley.com/GEFdata/digests/digests.html">Global Economic Forum</a>, Serhan Cevik of Morgan Stanley <a href="http://www.morganstanley.com/GEFdata/digests/20060921-thu.html#anchor0">wrote </a>that:<br /><blockquote><p>If the decline in commodity prices is a trend shift, Turkey stands to benefit a lot. The shock of soaring commodity prices has been a major contributor to Turkey’s inflation and current account troubles. This is of course not surprising, given its growing dependence on imported sources of energy.... [N]et energy imports surged from 4.4% of GDP in 2003 to 5.2% in 2005 and 6.5% this year, accounting for more than 70% of the worsening in the current account deficit from 4.4% of GDP in 2003 to 7.4% this year. This is why we have always been careful about passing judgment on external imbalances of the Turkish economy.</p></blockquote>It is good to see that somebody is paying attention to the reasons behind Turkey's high CAD in recent years. To clarify the point further I put a small table below that gives you the breakdown of the CAD. If the energy prices were at their 1996-98 rate, the CAD would be 2.6%. The net contribution of trade deficit to the CAD is in fact negative , once energy imports are excluded. In the second table, we can see that although the CAD has increased by 29 billion dollars, rise in energy imports explains 21 billion dollars of that.<br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/Clipboard01.1.jpg"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Clipboard01.1.jpg" border="0" /></a>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1157825827923821992006-09-09T10:58:00.000-07:002007-05-28T20:05:18.920-07:00Turkey - Country Forecast<blockquote><p>"Economic growth has been strong so far in 2006, but a sharp weakening of the lira in May-June, accompanied by higher inflation and monetary tightening by the Central Bank of Turkey, will lead to a slowdown in the second half of this<br />year and the first half of 2007. GDP growth is forecast to be 4.5% in 2006 and about 4% in 2007. " (Economist, August 21 2006).</p></blockquote><p><a href="http://en.wikipedia.org/wiki/Yogi_Berra">Yogi Berra </a>once said "Prediction is very hard, especially about the future!" </p><p>But, come on! Just look at the statistics as of Aug 15 for God's sake. </p><ul><li>First quarter GDP growth rate was 6.4 percent. </li><li>Second quarter industrial production (released on Aug 8) is 9.3 percent (it was 3.5 percent in the first quarter).</li><li>Based on this information, one can easily predict that second quarter growth will be 9-10 percent.</li><li>This means that in the first half growth rate will be around 8 percent.</li><li>For the remainder of the year, the country should fall into a sudden and severe recession (that nobody expects, even the Economist) to get 4.5 percent average growth rate in 2006.</li><li>A more reasonable estimate (say 3-4 percent for the second half) would give us around 6 percent rate for the year.</li></ul><p>Of course, this is the same magazine that predicted a recession in Turkey at the beginning of 2004 ...the growth rate, it turned out, ended up 9 percent.</p><p><strong>Update (Sep 13):</strong> GDP growth: 2006Q2: 7.5%, 20061H: 7.0%</p><p></p>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com1tag:blogger.com,1999:blog-33850657.post-1157477552146426192006-09-05T10:07:00.000-07:002007-05-28T20:06:28.301-07:00Is Foreign Capital Harmful For Economic Growth?<p><a href="http://www.imf.org/external/np/bio/eng/rr.htm">Raghuram Rajan</a>, who is the head of research department at IMF caused quite a debate in Turkey with his recent speech at a conference in Wyoming (bad boy!). In sevral op-eds prominent Turkish economists cited that speech to prove the virtues of (semi) closed economy over an open one that allows free movement of capital.</p><p>What did Dr. Rajan said in Wyoming (home of the VP Cheney. Hmmm?)<br /></p><blockquote><em>Our conclusion is therefore that in the long run, capital account opening is unlikely to help poor countries grow by providing resources in excess of what is available in the domestic economy.<br /><br /><em>Countries that use less foreign finance, or export more savings, grow faster. </em><p><em>Countries that invest more grow more than countries that invest less; but it is countries that invest more and save more (that is rely less on foreign capital) that do the best of all. In fact, within countries that invest more, those that save more (and thus run lower current account deficits) grow at a rate of about 1 percent a year more than countries that save less. </em></p><p><em>We find ... that controlling for domestic savings in our baseline regression eliminates the effect of the current account on growth but controlling for investment does not. </em></p><p><em>All this suggests that domestic savings rather than foreign savings are critical for growth.</em></em></p></blockquote><p>In other words, it is good to save more and invest it. (You go Robinson Cruiso!). On the other hand, if for a variety of reasons you are not able to increase your savings (which is the case in Turkey), then what is your best course of action? I say let's borrow the savings of other countries and invest it to increase production capacity (but use that money wisely because you are going to pay it back with interest). This is the second-best option and in fact only option that we face in Turkey given that we are living in a democratic society and our elected leaders are likely to be reluctant to commit suicide by forcing their constituencies to adopt a China like savings rate.<br /></p><p>Let me give a few numbers:</p><ol><li>Between 1960 and 2005, 1 percent increase in growth, on the average, has required an investment of 4.7 percent (of gdp) investment.</li><li>That meansto achieve a 6 percent growth rate, we need 27 percent investment</li><li>Average savings rate in Turkey in the same period was 20 percent.</li><li>If we assume that the savings rate will be the same in the future, we need 7 percent foreign capital to make up the difference.</li></ol><p>If you do not like this scenario, you only have two alternatives:</p><ol><li>Increase savings rate through high tax rates, low government spendings, or both (and commit political suicide)</li><li>Increase the productivity of the economy.</li></ol><p>How can we raise productivity? With more competition, new technologies, new business practices. In other words establish the rule of law in the country, cut the red tape, reduce corruption, invest on the infrastructure of the country, prevent oligopolistic business practices, create a competitive business environment, and of course attract more foreign direct investment.<br /><br />Until then, the country needs foreign capital to grow.</p>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1157475881029102512006-09-05T09:59:00.000-07:002007-05-28T20:07:33.196-07:00Ranking Economics PapersAccording to a recent working paper written by E. Han Kim, Adair Morse, and Luigi Zingales, the most cited article is Halbert White’s paper on robust standard errors. An elite group of 11 economists authored or co-authored at least three papers. Robert Barro, Eugene Fama, and Joseph Stiglitz have six each. Michael Jensen follows with five; Robert Lucas and David Kreps with four; and Robert Engle, Lars Hansen, Robert Merton, Edward Prescott, and Stephen Ross have three each.<br /><blockquote><p>ABSTRACT</p>We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially. <p></p><p></p></blockquote>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1157473575551081552006-09-05T09:25:00.000-07:002007-05-28T20:08:21.295-07:00Viruses<strong>INTEREST GROUP ECONOMIST VIRUS</strong> - Divides your hard disk into hundreds of little units, each of which does practically nothing, but all of which claim to be the most important part of the computer.<br /><strong>ECONOMETRICIAN VIRUS</strong> - Sixty percent of the PCs infected files will lose 38 percent of their data 14 percent of the time (plus or minus a 3.5 percent margin of error).<br /><strong>POLITICAL THINK-TANK ECONOMIST VIRUS</strong> - Doesn't do anything, but you can't get rid of it until next election.<br /><strong>GOVERNMENT ECONOMIST VIRUS</strong> - Nothing works on your system, but all your diagnostic software says everything is just fine.<br /><strong>MARXIST ECONOMIST VIRUS</strong> - Helps your computer shut down whenever it wants to.<br /><strong>SOVIET ECONOMIST VIRUS</strong> - Crashes your computer, but denies it ever happened.<br /><strong>MAINSTREAM ECONOMIST VIRUS</strong> - It claims it feels threatened by the other files on your PC and erases them in "self-defense."<br /><strong>CENTRAL BANK ECONOMIST VIRUS</strong> - Makes sure that it's bigger than any other file.<br /><strong>MULTINATIONAL CORPORATION ECONOMIST VIRUS</strong> - Deletes all monetary files, but keeps smiling and sending messages about how the economy is going to get better.<br /><strong>SUPPLY-SIDE ECONOMIST VIRUS</strong> - Puts your computer to sleep for four years. When your computer wakes up, you're trillion more dollars in debt.<br /><strong>NEW ECONOMY VIRUS</strong> - Also known as the "Tricky Dick Virus." You can wipe it out, but it always makes a comeback.<br /><strong>ENVIRONMENTAL ECONOMIST VIRUS</strong> - Before allowing you to delete any file, it first asks you if you've considered the alternatives.tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0tag:blogger.com,1999:blog-33850657.post-1157392495850028402006-09-04T10:04:00.000-07:002007-05-28T20:08:51.709-07:00Jobless Growth in TurkeyThere is a widespread belief that despite the high rate of economic growth in the last five years (<a href="http://www.morganstanley.com/GEFdata/digests/20060905-tue.html#anchor0">real gdp </a>increased by more than 35%, on a cumulative basis, in the last 17 quarters following the deep recession in 2001), the Turkish economy has failed to <a href="http://www.morganstanley.com/GEFdata/digests/20060828-mon.html#anchor6">create jobs </a>to reduce <a href="http://www.morganstanley.com/GEFdata/digests/20050303-thu.html">unemployment rate </a>below10%). Many pundits call this "Jobless Growth"<br /><br />Let's have a closer look at the numbers: (our analysis is restricted to 1990-2006 period, since the government begun to collect its first reliable statistics on employment in Fall 1988)<br /><br />In the first figure, we look at the economic growth (red line)and job growth (yellow line). Historically, the link between these two seems to be weak.<br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/Emp1.jpg"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Emp1.jpg" border="0" /></a><br /><br />Part of the explanation may be found in the structure of employment. In the 1990s more than one third of the workforce was in the agriculture sector, although agriculture compromises less than 20% of GDP. This mismatch may weaken the link between job growth and GDP growth.<br /><br />Next, we divided job growth into two parts: nonfarm employment and agricultural employment and looked at annual growth rates in the next figure (blue line for nonfarm employment).<br /><br />Interestingly enough, we are witnessing the highest nonfarm employment growth rate and the lowest farm employment growth rate in the last 15 years.<br /><br /><p></p><p><a href="http://photos1.blogger.com/blogger/2282/3686/1600/Emp2.jpg"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Emp2.jpg" border="0" /></a></p><p></p><p>Two questions come to my mind: Are we witnessing a radical structural change in the job market? Is there something wrong with the statistics on agricultural employment valid?<br /><br />The numbers are suspicious for the following reason: Almost all positive growth rates in agricultural employment came when the economy is in recession: 1991, 1994, 1999, 2001. Is it possible that those people who supposedly work in the agriculture sector realy work or they just return to their villages when the economy is in trouble? </p><p>Let's look at the simple correlation between the variables, first: :</p><p>Employment Growth in Agriculture vs. Production Growth in Agriculture: 0.02<br />Growth in Nonfarm Employment vs. Growth in Nonfarm Production: 0.26<br /><strong>Employment Growth in Agriculture vs. Growth in Nonfarm Production: -0.42</strong> </p><p>Let's put the numbers in a chart, where this negative relationship between nonfarm production growth (y-axis) and agricultural employment growth (x-axis) is easily observable:<br /><br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/Emp4.0.jpg"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Emp4.0.jpg" border="0" /></a><br /><strong><br />Lesson 1</strong>: Better to look at nonfarm employment because there is something fishy in agricultural employment data.<br /><br />In the next graph, we look at the relationship between nonfarm employment growth (blue line) and nonfarm production growth (red line). The link is more stable and significant, but still there is something wrong with the figure. In particular, look at 1994 and 1999. Although the country fell into depression in these periods, the economy continued to create nonfarm jobs!!! How can this be possible? </p><p><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Emp3.jpg" border="0" /><br /></p><p>My explanation is the changes in the household survey (the only data source on employment in Turkey), especially in the sample size and the methodology.<br /><br />The State Institute of Statistics started to conduct households surveys on a bi-annual basis in 1988. In 2000 the HH survey methodology was updated (sample size was doubled, and the coverage was extended to other regions of the country). Between 2000 and 2005 survey cycle was reducted from 6 to 3 months. In 2005 the HH survey was updated once again to make it compatible with Eurostat standards. Number of regions covered was raised from 7 to 26 and sample size by 50%. Starting in Jan2005, HH survey has conducted each month.<br /><br /><strong>Lesson 2:</strong> You can rely more on 2000-2005 numbers than 1998-2000, and more on 2005- numbers than 2000-2005.<br /><br />Let's focus on 2000-2006 period and update our simple correlation table:<br /><br />Employment Growth in Agriculture vs. Production Growth in Agriculture: -0.40<br /><strong>Growth in Nonfarm Employment vs. Growth in Nonfarm Production: 0.60 </strong><br />Employment Growth in Agriculture vs. Growth in Nonfarm Production: -0.37<br />And also update the previous figure as well (nonfam job growth on the x-axis, nonfarm production growth in the y-axis):<br /><a href="http://photos1.blogger.com/blogger/2282/3686/1600/Emp5.jpg"><img style="CURSOR: hand" alt="" src="http://photos1.blogger.com/blogger/2282/3686/400/Emp5.jpg" border="0" /></a><br />This is the picture of so-called "jobless growth".<br /><br /><a href="http://www.tuik.gov.tr">Data Source</a> </p>tugrulhttp://www.blogger.com/profile/13122861688168339660noreply@blogger.com0