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In Our Chief Economist

Interest rates and exchange rates

THERE IS NO ONE-TO-ONE correspondence between the rate of interest and the exchange rate. Still, more often than not the rate of interest is the only variable that can control the exchange rate. Thus, it is possible to defend the currency, both under a peg and under the float, up to a certain threshold beyond...

Article
In Eco Analysis

The foreign reserves issue

LAST NOVEMBER, when the Central Bank Governor was replaced and the Treasury and Finance minister resigned, the backstage in Ankara was shaken by the reserve issue and allegations that President Erdogan had only just been made aware of negative reserves. Three months have passed and until last week, there had been no objections to the...

Article
In Eco Analysis

2020 is over in terms of inflation, but its effects remain

THERE is a correlation, albeit not one-toone, between currency increases and price increases, particularly in producer prices. The change in producer prices is also reflected in consumer prices after a while, on a moderate scale. It should be underlined that the reflection from producer prices to consumer prices is limited due to the “structure of...

Article
In Our Chief Economist

2021: A brave new world?

WELL, that is the end, folks! We have finally come to the anti-climax and first, all positive expectations, and then all the calamity forecasts are borne out by events; they have become realities. The new era is not only characterized by lower interest rates, but also by lower growth throughout the global economy. It is...

Article
In Our Chief Economist

Endogeneity of the money supply and credit

IT IS TIME to offer a few guesstimates on what 2021 may bring. My focus is on the Turkish economy and finances. First, a very quick reminder of what has happened over the last three years. I am concentrating on monetary policy only, not on structural weaknesses and such. I emphasize endogenous money, and don’t...

Article
In Our Chief Economist

Bringing back economic serenity

Finally, the Central Bank has come to the rescue. True, there is a shortage of funds to rekindle investments. Again, it is no secret that net reserves are about minus USD 45bn. Also, it would take more than one step to convince households – let alone high net worth individuals, who would obviously behave defensively...

Article
In Our Chief Economist

From here to there

ACTUALLY, the unforgettable classic movie’s name was ‘From here to eternity’, but we can’t reach that far amid incredibly noisy signaling and suchlike. Not only is the surrounding politico-economic space at large noisy, i.e. Eastern Mediterranean, Libya, Greece, U.S. elections, etc., but also the monetary policy space itself is – or was – so until...

Article
In Eco Analysis

This isn’t a rate hike?

T H E C E N T R A L B A N K’ S policy rate, which the bank decided to use to regulate the market, declaring it the real rate, still stands at 8.25%. But the weighted average cost of funding has increased to double-digits after five and a half months. The Central...

Article
In Eco Analysis

Ordinary questions for natural gas discovery

I ’ M not an energy expert. That’s why I’m not going to dive into the technical debate regarding the 320 billion cubic meters of natural gas reserves discovered in the Black Sea. But still, after the first wave of excitement, joy, and simultaneous disdain, it’s important to note some of the questions raised by...

Article
In Our Chief Economist

Black Sea puzzles

BEGINNING with the pamphleteers of the 16th century, several authors have pointed to the roots of Spanish economic woes and singled out the influx of Mexican and Peruvian precious metals, a phenomenon that is worth labelling Moctezuma’s curse. Moctezuma II – in some sources Montezuma II – was the Aztec emperor when conquistador Hernán Cortes...

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