Wednesday, June 30, 2010

EconNews Roundup

First quarter growth, at 11.7% yoy, was in line with expectations. I will have more to say on this tomorrow, but the seemingly high figure is mostly a base effect, after last year's (2009Q1) 14.5% contraction. I definitely would not call it a stunning upturn

Fortune 500 Turkish companies increase profits, but jobs & sales decline over the past year.

The decrease in spending per tourist is only one of the problems facing Turkish tourism, but you'll have to wait for my column on tourism (in 3 weeks) for the whole story (Hint: it involves competitiveness of the sector).

My time-based neighbor discusses whether or not the layman is economics-literate. Interestingly enough, we asked questions similar to the ones he was asking at the March and June KONDA surveys, and the results, when combined with similar questions from earlier surveys, are surprisingly in line with the country's economic health. So people are economics-literate, although they might not know how to take derivatives or economics jargon.

I was discussing imports in my previous post, but when there is imports, there is also exports:)- again, the number is mostly a base effect.

Another TEE (Turkish Economics Enigma)

I like a good mystery, so I have been writing about the ones in Turkish Economics, such as UFOs (unidentified financing objects), from time to time. A mystery I have not mentioned until now is the recent break in the link between import taxes and actual imports. Again, a picture is worth more than a thousand words:
As you can see, import taxes and imports used to move in perfect sync until recently. This was rather convenient for Turkey economists, as they could use import taxes to predict imports, as the former is released earlier than the latter. While they can still adjust their regressions to come up with good forecasts, the relationship has been broken. And today's trade release continued the recent tradition with spitting out an imports figure smaller than as predicted from taxes.

I have read quite a few explanations for this seemingly enigmatic relationship, none of which I have found satisfactory. So for me, this is still a riddle.

By the way, I will come back to today's data releases, namely growth and trade, tomorrow, if not later tonight.

Interesting Picks

Yves Smith summarizes today's top story: ECB liquidity withdrawal efforts.

I am rather by simple debt ratio comparisons and treating debt as the sole sovereign risk factor, so it is comforting to see someone sharing my worries.

The article on who should discuss Macroeconomics that I had linked a couple of days ago is the hottest stuff on the Econ. blogosphere. Mark Tahoma summarizes the posts of the last couple of days in addition to sharing with us his own thoughts. FT Alphaville joins in as well. But maybe, academic economists are as helpless as mere mortals- Mark Tahoma takes on this topic as well. And Wohwhile Canadian Initiative adopts an indirect route to discuss the same paper.

Thanks to David Beckworth, I am aware of a new Cleveland Fed website offering expected inflation from market info. on a monthly basis. Note that they used to do this by inflation linkers, but then discontinued it during the crisis, arguing that the indicators were no longer showing what they were supposed to show.

Video of the day: Physics Envy, one of the most common illnesses found in economists.

The Economist's special report on debt.

I don't like to repost, but since I really liked it and it is now appearing in a different web site, I am reposting the ten commandments for fiscal adjustment in advanced economies.

I make it to the number of the beast...

Meaning 66.6, or 67 to round up, posts for the month, my self-appointed goal from last week. My friend Eren joked at the time that I had written that post just to reach 50. That seems to be the case for this post as well, but I still have quite a bit of stuff coming today: Interesting Picks & Econnews Roundup as well as a couple of notes on today's data releases (growth and trade balance), so I really didn't need this post at all...

As for a new goal; maybe I should be aggressive and aim for 100 for July, but that would require 3-4 posts per day. We'll see...

The Dismal Performance of "Stars"

Seeing C. Ronaldo on the pitch last night made me wonder why he was so worse than he was in Real Madrid. In fact, his performance was the rule rather than the exception: Many other football stars have been invisible in South Africa, so after a bit of brainstorming, I came with the following hypotheses:
  1. Just don't care: Players like Ronaldo make millions of euros each year; an injury suffered at the World Cup would cost them a lot. Besides, they have already proven themselves, so they have no need (unlike Germany's Muller) to increase their value by performing exceptionally at the World Cup. This is incentive theory in action.
  2. Externalities: It could also be that national teams are less suited to a star than top club teams. There could be quite a few reasons for this: For example, if you are spending 100 millions euros in Ronaldo, you want to make sure he will be paired with player(s) suited to his style in the attack line. National teams have no such luxuries; while they choose the best of the nation, they have a much narrower pool than club teams, especially club teams like Money U. Barca and Real that have no real budget constraints.Or it could be that star players perform better when they are surrounded by good players who can, for example, pass the ball to them.
A soft test of the first hypothesis would be to compare the performance of stars at the World Cup with their first World Cup performance when they were budding stars. Or for each World Cup, you could compare the performance of established stars with youngsters who actually turn into starts in a few years' time.

To test the second explanation is more direct, at least for me: I would expect to find a positive relationship (after controlling for other stuff of course) between a star player's World Cup performance and the difference of rankings between the national team and club.

Anyway, which explanation, do you think, is more prevalent? To me, there is some of each going on here: To give two examples from my favorite World Cup team (so far), for Mesut Ozil, the externality effect could be more prevalent, whereas for Thomas Muller, it could be all about proving himself. BTW, you could easily test both explanations together in a single regression, of course.

Or, do you have an alternative explantion?

Car and Blogger

Your friendly neighborhood economist almost had a serious accident Sunday night due to... well... lack of standardization in cars.... My car, for some weird reason, does not have the emergency brake as a stick in between the front seats; it is tucked under the steering wheel, to the left, just next to the door. But it turns out that in my sister's car, which I am using in Istanbul right now, that's where the latch for the hood is. So I had accidentally opened the hood instead of releasing the handbrake- I did release the brake once I noticed the brake light was on, but drove on for a few miles with the hood open.

This incident has made me wonder what economists, who like to poke their noses into everything, have to say about the economics of standardization. A simple google search (I opted for regular google rather than scholar) brought out quite a few articles and books. Out of the public stuff, I decided on a 2000 paper, which I have printed for in-flight reading on my way to Marmaris tomorrow. I hope to post my takes from the paper soon.

Another car-related item of interest is the recent increase in the speed limit in divided highways. This's from Hurriyet Daily News Press Scan for June 28:
People from all corners of Turkey reacted harshly to new legislation that increased the speed limit on highways from 90 kilometers per hour to 110 kilometers per hour. Many Turkish associations on traffic demanded that President Abdullah Gul veto the legislation.
It makes sense that a higher speed limit will cause more fatal crashes, and there are studies that reach that conclusion for the U.S. But the public outcry in Turkey is not based on any evidence at all, which is, when you think about it, is very typical of my beloved country.

I am not saying the protesters are wrong; in fact, it is more likely that they are right. I just don't like the attitude of claiming without supporting. And let me propose the following scenario: Suppose that the speed limit is enforced in divided highways, but not in multi-lane intercity highways in Turkey (this is more or less the case). As a result, inter-city drivers would want to make up for the time lost on divided highways by going extra-fast on multi-lanes. Then, a higher speed limit in divided lanes could, at least theoretically, induce them to go slower on multi-lanes, and 90  rather than 120 miles/hour there could make a big difference. As a result, you'd expect fatal crashes to increase in divided highways but decrease in multi-lanes. I know this is not the most probable scenario, but empirical economics has been known to surprise from time to time.

In fact, I should convince the Daily News to do a story once the data for crashes for July become available; let's see if there is a significant change from last month or same month last year. So I will be coming back to this topic soon.

Tuesday, June 29, 2010

Pricing Riddle Solved?

Loyal Reader Evren wrote the following as a comment to my latest weird pricing find:
I see this as a schema to increase consumption, the same as buy three get one free deal while you need only one dish washing liquid that lasts you a month. In this case: you see the odd pricing and quickly realize that ordering three 6-wing packages is more economical. Where does game theory come into play? You think you are outsmarting the retailer while the retailer knows that you think you are outsmarting him by devising this clever schema of odd pricing to confuse you.
That might be right, but then there is always the question: What if I know their strategy? But then what if they know that I know their strategy? And if I know that they know that I know their strategy? And so on and so forth... In fact, you can read about one of the most famous examples of this strategy, or even see it visually in an all-time classic of the seventh art.

By the way, that movie has other great quotes such as inconceivable (and the follow-up, you keep using that word. I do not think it means what you think it means), which has featured in my blog, or my favorite: Hello. My name is Inigo Montoya. You killed my father. Prepare to die... Ahhh, the good old days...

As a small aside, The Princess Bride was sort of Yale tradition in the sense that it was the first movie incoming freshmen (or fresh people to be PC) were shown. I wonder if that tradition is alive and kicking...

Coming back to more serious matters, Evren's point does make sense, but I think I am leaning towards the plain stupidity argument...

Blogger Appreciation Day

I got two extremely engaging reader comments early this morning, which I will share with you and respond later today.

But in honor of these comments, and following the tradition of the Reader Appreciation Day, I would like to declare today Blogger Appreciation Day...

Monday, June 28, 2010

Weekly Hurriyet Column: Republican economics for the people

Below is the unedited version of my column for this week. You can read the final version at the Daily News website, but since I have been editing my columns myself on the Daily News website since March, you won't see much of a difference between the two. The title is just a cheesy word-play, but you know by now that I am a cheesy kind of guy...

As for the column, you'll see that many questions remain on CHP's economic policy, as Kılıçdaroğlu has chosen to speak about only a handful of topics. For example, I would like know the the following: What is CHP's take on capital flows? What role do they see for Turkey in the G-20? What is their take on the fiscal rule? On an independent revenue administration? How about energy or the environment?

In fact, as you'll see (or rather read), Kılıçdaroğlu does not tell much about the few topics he chooses to discuss, either. So  my long-running goal of doing a lengthy interview with the CHP’s top brass in economic policy is alive and kicking. Anyway, here we go:

In my heated arguments with die-hard Republican People’s Party, or CHP, supporters, where I almost always end up being labeled as a closet Justice and Development Party, or AKP, sympathizer, I try to defend myself, when my political arguments fail, highlighting that we know nothing about CHP’s economics policy.

But with the new leader Kemal Kılıçdaroğlu, things seem to be moving in a new direction, and a good direction at that, in terms of economics. For one thing, Kılıçdaroğlu has made economics one of the main items in his agenda after he took over the main opposition party following a dramatic episode of sex, lies and videotape. In an interview with our sister daily Referans last week, he outlined CHP’s economics agenda.

Although we do have to see more details, Kılıçdaroğlu is right on target by placing transparency and accountability at the pillars of CHP’s economics program. While his suggestion of printing, on the back of tax returns, where taxes were spent last year will be a drop in the ocean, he is correct in stating that when you set politics out of the accountability domain, you cannot prevent corruption.

That’s how the developed world handled corruption in the past. It is a little-known fact that today’s richest country was once one of the most corrupt ones. There is a huge economics literature on how the U.S. dealt with corruption in the era of the Robber Barons. While it is difficult to single out one or two policy recommendations out of that episode and others, accountability, transparency and rule of law always seem to come out on top as the main pillars of any anti-corruption strategy.

Another useful suggestion comes for tackling poverty. Although he again does not provide any details, Kılıçdaroğlu’s suggestion that the level of poverty should be determined by experts is a necessary first step in overhauling the current multifaceted poverty reduction strategy, which does not allow for meaningful impact analysis and is appallingly open to pork-and-barrel politics.

On the other hand, I see traces of CHP’s old guard with Kılıçdaroğlu’s handling of the Kurdish problem. While his suggestions of subsidies, incentives and zero-interest credit are sweet music to many, I am not sure, despite being a die-hard economist who sees the dismal science everywhere, that those are the real binding constraints. But since I don’t want to be the latest Ergenekon casualty, that’s all I have to say about that.

As for Kılıçdaroğlu’s family insurance scheme, it reeks of the old guard all over. For one thing, unconditional cash support or minimum income guarantee for poor families (it’s not clear which he has in mind) would not only be providing the wrong incentives, it would also disrupt efforts to fix poverty reduction strategies. As for the state preferring those on this insurance in its hiring decisions, it is the worst economic policy recommendation I have heard in a long time.

But Kılıçdaroğlu might be onto something when he says that all state projects would be analyzed in terms of social welfare. I doubt that he has in mind a building full of people drawing supply and demand curves and calculating areas of rectangles, trapezoids and triangles, but goal-oriented spending and impact analysis are the big deficiencies of Turkish fiscal policy at the moment. If CHP would enact an institute similar to the U.S. Congressional Budget Office, they would steal my vote on that alone.

As for being labeled as a closet AKP sympathizer, I have learned to live with that, especially after I was able to document the degree of polarization in the Turkish society in the KONDA surveys I have been working on as a consultant.

Emre Deliveli is a freelance consultant and columnist for Hurriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at

Challenging Everyday Economics: Utility

After the crisis, it became common to criticize mainstream macroeconomic theory. I would like to go further and criticize mainstream microeconomics, specifically, utility theory.

I have been inspired by my desire to explain my seemingly irrational act of paying TRY 34 (about USD 22) for a 220 milliliter bottle of genuine  Vermont maple syrup, which would not normally go for more than 4-5 bucks in New England.

My friend, being an Econ. major and ex. Econ. consultant @ NERA, tried to console me by highlighting the utility that I would get from it. But then it should be that my utility, at least in the case of maple syrup, should be a function of the time I have not been able to consume it- sort of a craving effect.

That's hardly revolutionary; in fact, I have seen quite a bit of models that adopt a similar utility structure. But it does illustrate the fragility of even the taken-for-granted micro. frameworks.

By the way, I used to pay a huge premium for raki, Efes, baklava and Turkish food when I was in the U.S., and I like to splurge myself in U.S. style steak at Dukkan and sushi from time to time in Istanbul. None of these would make sense to the basic models of undergrad. micro.

EconNews Roundup

Turkey's trade with its neighbors is on the rise, but it is impossible to figure out how much of this is a crisis substitution effect and how much a structural change.

OK, property sales to foreigners have increased significantly in the last couple of years, but I have no idea how one can know for sure this is because of the crisis.

Turkey improves in real estate transparency, but almost all the factors mentioned are actually a few years old, so I guess the index is lagging a bit behind...

Gold prices hit the Turkish wedding industry. Again, an article I struggle to grasp, as it assumes that gold's elasticity is bigger than 1. Think about it, price goes down, quantity bought goes down- total value of gold received (PxQ) would be less than before if an only if the percentage decrease in quantity is less than the percentage increase in price.

Speaking of gold, I must be a skxawng, but I just don't get how one would tie the all the decrease in gold coin production to surging prices.

Vakifbank goes East (or rather Southeast).

Last but hopefully not the least, your friendly neighborhood economist takes on CHP's economic policy.

Where is my beloved country?

The following is from IMF's Morning Press, a daily email summary of Economics news:
The IMF estimates that global growth in five years would expand 2.5% faster if the U.S. and other wealthy countries slash budget deficits more deeply than they are planning, and if China and other large emerging countries do more to boost domestic consumption. The IMF exercise, conducted at the request of the G-20 nations as part the group's rebalancing effort, G-20 countries were divided into three groups: advanced countries with trade deficits, European countries with trade surpluses and emerging countries with trade surpluses. Countries with big deficits, especially the U.S., are supposed to import less and save more, while those with trade surpluses, especially China, Europe and Japan, do the opposite. (WSJ)
Maybe, there should a be a fourth group, emerging countries with trade deficits, with one member, Turkey, in it:) Honestly, I have no idea into which group they have placed my beloved country.

I am on Twitter

I just got a Twitter account this morning after being coaxed by my buddies Ufuk and Cagan over a few glasses of raki. Furthermore, I linked it to this blog via Twitterfeed. So from today (actually at most half an hour or so later), you should be able to follow my blog from Twitter as well.

BTW, my Twitter name is edelivel, in case you prefer to follow me there. I never mentioned it before, but you can also find me in Facebook (just search with my full name), where the posts are automatically updated as well. However, I wouldn't recommend you to follow me in Facebook, as the it takes several hours for the posts to get there due to Facebook's shitty (pardon my French) application. But maybe, there is some good in this, because now that I linked Blogspot to Twitter and Twitter to Facebook (via Facebook's Twitter application), my blog posts will appear in Facebook via Twitter in approximately half an hour or so. Then, if you miss them the first time, you'll be able to see them again in a few hours' time, once Facebook does its own updating.

Interesting Picks

Seasonality map for the US stock market. Note that such maps are rather straightforward for any asset with a statistics package such as SPSS, Stata or Eviews.

Maybe, it's not the public, but private debt we should be worried about in the Euro Area.

Economics is hard- sorry no HT, as I am not sure where I got this from.

Just the appropriate time to remind a well-written football book.

Housing supply metrics for the U.S. by Calculated Risk. Speaking of housing, the Big Picture continues with his discussion of home prices.

Sunday, June 27, 2010

Yet another weird pricing....

This is even weirder than my KFC find from last year:
This is from Cafe Vittoria, a pizzeria available at Yemeksepeti, the Turkish online food delivery portal.
Following my friend Eren's advice, I should give them a call and just ask them why they do that, as neither me nor The Undercover Economist (aka Tim Hartford) has a satisfactory explanation. Doing so will also hone my journalistic skills, as I am hoping to do more journalistic (rather than op/ed or analytical) stuff for the Hurriyet Daily News & Economic Review in the future.

While I am at it, maybe I should also ask them is there is anyone who actually orders 18 chicken wings direct from the menu for 24 liras rather than ordering 3 6-packs for 18 liras...

BTW, if you have an explanation for this scheme, by all means, please share it with me, preferably as a comment to the post so that others can see it as well.

Saturday, June 26, 2010

Roubini Post: For South Africa, the Vuvuzelas Blow

This post already appeared in the Hurriyet Daily News on May 30; Europe Economonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

BTW, it seems I was not the only one who noticed the dichotomy between Turkey and South Africa. Here's from Barcap's most recent Emerging Markets Quarterly:
As a tail risk trade in EMEA, for a scenario of prolonged risk aversion, we recommend long TRY/short ZAR FX. This offers positive potential carry with relatively more favorable FX technicals (eg, large local FX deposits) in Turkey. We also recommend overweighting Turkey versus South Africa in our Global EM credit portfolio.
Speaking of people writing on the same topic as your friendly neighborhood economist, I recently read an article in Finansbank's investment site Finansonline on the effect of EURUSD- but rather than look at the impact on trade, they are discussing the effect on Turkish companies' balance sheets, so it is kind of a nice complement to my short post on that topic.

Who says there is corruption in Turkey?

Just after I left Konda last night (or rather this morning), I got stopped at a police checkpoint for a  DUI check. After I handed out my driver's license and registration, the cop told me, "Please get your money back".

I thought they guy was on drugs, until I remembered that I had put a couple of hundred dollars inside the registration a few days ago: My sister had got some stuff for me in NYC, and I decided to put the money in her registration, as I thought it'd be safe there. Well, then I went to Marmaris with my car and flew back, leaving my car behind, and when my sister postponed her return, her car became available for me during my stay in Istanbul.

I still can't decide which looked more awkward- appearing to have bribed a cop or telling this weird story in my defense, which, when you think about it, is almost as bad as my dog put it there. Anyway, luckily, the cop didn't do anything for me trying to bribe him, but he was sure that I was trying to buy my way out of the alcohol test, so he showed me the test results, knowing that I would object to being over the legal limit. Imagine his surprise when I got a perfect score (0.0), which wasn't actually surprising, given the last time I had consumed alcohol was almost a week ago:) But I should be grateful to him nevertheless: If he got the "bribe" and let me go, I would not have figured out what was going on...

As an economist, this incident brought to my mind Turkey's poor rankings in Transparency International's Corruption Perceptions Index. I know that one good apple doesn't mean that the rest of the case is not rotten (uppps, two negatives in one sentence), so maybe I should get a hold of some fake dollars and try the registration trick every time I get stopped. But then I could get arrested for counterfeiting as well as bribery...

Vicissitudes of Fate

A few hours after I had posted on my horrible PR experience, I figured out, on the way out after I had locked up the Konda office in the wee hours of the morning, that the PR company was in the same building as Konda. I am glad they are eight floors down; otherwise, they might have felt my bad vibes:)

Paying homage to one of my favorite movies, I am inclined to call this a vicissitude of fate.

Friday, June 25, 2010

Interesting Picks

When I see indices like these, I remember my fruitless efforts to start up similar ones in Turkey for the Hurriyet Daily News & Economic Review.

Thanks to Menzie Chinn of Econbrowser, I have learned that OECD Factbook is now online. They have interactive charts as well as data, all of which is linked from Econbrowser.

Very nice (and concise) summary on determinants of productivity.

If you would like a quick introduction to the most important discussion in the Econ. blogosphere at the moment, here's the Econ gangs of New York.

Some see it as Latin American dominance, but here's another way to see the sweet-16 of the World Cup.

Continuing with football: It's no surprise that the Yanks have advanced to the sweet 16. Maybe, I should take over the Turkish national team, or at least Besiktas...

Now, this is really some weird pricing, even weirder than my KFC find.

To buy or not to buy (Greek CDS), that's the question.

Some people just don't learn. The better Gaussian Copula will work fine- until the next crisis.

And I thought Turkey had a large funding need in August- I guess it will be im Juli for the Spaniards before Rhapsody in August for the Turks...

Wouldn't it be natural for the NAIRU to rise after such a deep recession? I am no US expert, but I do think that NAIRU has risen for my beloved country- I mentioned that in a Hurriyet column once, but now I have no idea when or under what context.

To close up, the week in pictures.

PR without the P or the R

Instead of writing this post from Konda, where I am working on their monthly Barometer survey, I was supposed to be at the Middle East Economic Association's annual conference in Istanbul.

But when I inquired at the PR firm organizing the conference on press registration, I was directed to their regular registration page, a polite way of saying that I had to pay like everyone else. After making a small calculation, I figured there would be no way I would even break even this way, so I politely explained that press should be able to attend such conferences. A long silence followed, after which an academic, cced to their response to me, wrote, saying that I could follow the conference as a member of the press (thanks for the generosity), but I would have to pay for the gala dinner (as if I had asked for that)- as you'd appreciate, a fee will be charged for the gala dinner were the exact words. I was really fed up with all this, so I just gave up... 

And the funny thing is that a member of the program committee, who is also on the scientific contacts list, had emailed one of our seasoned reporters, asking if she would make it to the conference and promising exclusives if she did. Well, the treatment I received was really exclusive...

Now, you tell me: Does this behavior have anything to do with public or relations?

As loyal readers would know, one of my long-term column ideas is the quality of services. It seems that if I go like at this rate, I will soon plenty of case studies for my column.

But I should be fair; the PR firm at the Garanti Future Summit was first-rate (except the internet scandal); the guy we dealt with went out of his way to grant us interviews with both of the speakers, which formed the pillars of my Hurriyet column the following week.

In the meantime, I have decided not to attend any conferences in Turkey, a promise I am bound to break, but still...

I make it to 50...

...posts for the month with this one...

Next goal is the number of the beast, 66.6, or 67 to round up, and I have 5 days (and plenty of stuff to write about) to do so...

EconNews Roundup

The Turks were at Vienna's door more than 4 centuries ago; now, it is the other way around.

Are EU's woes starting to hit Turkish exports? Unfortunately, that's also the impression from yesterday's release of June real sector confidence indices.

The dichotomy between the rating agencies' and markets' view of Turkey has been a topic of discussion for a long time. I personally find the hole debate redundant: I don't want to defend the rating agencies, but there is still quite a bit of political and economic uncertainty in Turkey as well as the need for structural reform, as I have a argued a lot in my columns. As a ratings agency, you need to err on the side of caution, as you cannot change ratings too often. Besides, a comparison with Russia is not that useful, especially when that country has been affected so much by oil prices. But it is true that Turkey does look better than many of its peers with a better sovereign rating right now.

Istanbul's tight grade-A office space market. But I think that the last paragraph of the article is pointing at a more binding constraint in terms of attracting foreign companies: I have heard too many foreign CEOs complain on how tough it is to get permission for their foreign workers.

Women not represented on Turkey's boards, but given the international trend with this and women's position in all other aspects of society, such as politics and even labor force participation, I would say they are not doing too bad in board representation.

Adana has the highest province jobless rate. Riddle of the day: Why do you think that the lowest unemployment rates are in Gumushane, Bayburt and Ardahan?

World Bank Turkey head urges Turkey to make labor markets more flexible. He does have a point, but I see labor market flexibility as a necessary (but not sufficient) condition to ease Turkey's labor market woes- increasing women's labor force participation and training workers more suited to the demand of the private sector are equally important.

Appreciating the Readers (II): What is this Blog Good For?

Here's another reader comment:
Could we have a bit more mainstream macroeconomic reporting and comment please -- or am I an economic simpleton who has stumbled into a party for professional bankers and financial services industry people?
No, you are not! As George Costanza would say, it isn't you, it's me! Let me elaborate:

This question is related to my own question marks about the nature of this blog. The problem is that I try to cater to professional economists following Turkey, and I have readers in places like the IMF and RGE. But at the same time, I would like people untrained in Economics (but interested in the Turkish economy nevertheless) to follow my blog. In addition, I would like to give my Turkish readers a summary of global developments, through my own lens, with my Interesting Picks.

And that's only my reader attraction goals! I also would like to use the blog for my own archiving purposes so that I can easily access to my articles or find a paper I liked/would like to read.

With so many goals, it is normal that there will be articles of very different scope here. I admit that my Interesting Picks will be interesting for mainly economists and finance professionals, but all my official writings in Forbes and Hurriyet Daily News & Economic Review are bound to be much more mainstream- if you don't find them that way, let me know because they need to be.

I am also willing to answer mainstream questions in the blog, and I have done so quite a few times, the latest being Wednesday's answer to the question on current account deficits.

Appreciating the Readers (I):

As I promised, I am responding to reader requests, as part of the reader appreciation day:

A reader comments:
I was a bit shocked by the very oblique fashion in which you responded to D. Rodrik.
The reader is responding to my comments from Wednesday's Interesting Picks:
Dani Rodrik no longer recognizes the country where he was raised and spends most of his time when he is not teaching in the U.S. (subscription-only). Being a resident of that country, I would say that it had changed quite a while ago, but Dani has only recently been noticing...
I should have written this in the post, but the comments stem from Dani's own admission.When he first started politics-blogging after the detention of his father-in-law, Dani admitted that he had first seen Ergenekon as a democratization process and supported it, only to find out later on that was not "entirely" the case- I could not find that post, so I am quoting from memory and  I cannot relay his exact wording, but this was more or less what he said.
BTW, I worked for Dani as his teaching and research assistant and have the utmost respect for him, so I would be the last person to respond to him in an oblique fashion.

Thursday, June 24, 2010

Interesting Picks

It seems Swiss exporters are about to join ranks with their Turkish counterparts on ranting about the exchange rate.

I wonder if I'll ever see the day a Turkish MP cites a serious academic paper.

A recent RBS study showing that 2/3 of all liquidity is absorbed by piggy-banks (or rather banks in PIGS) has been getting a lot of attention in blogs of late.

Another point of interest was the Fed announcement. While most commentators saw its tone as dovish,at least one is arguing that the Fed is a quantitative tightening stage. BTW, Aleph provides the redacted version of the FOMC statement.

But perhaps the most popular item has been the recent US housing downturn. I chose this piece among many, not only because it summarizes all the relevant issues neatly, but also because it links to a housing expectations survey, by none other than my undergrad. advisor.

Freakonomics has noticed the freaky South American success in the World Cup as well.

ECRI, the new crystal ball of Economics, is anything but that, at least according to its creators
A new banking crisis dataset, all the way through 2009!

Last but not the least, I am linking an article on the long-term effects of early childhood development because I plan to write about this, in the Turkish context of course, in my weekly Hurriyet column soon.
But since I have started to selfishly pursue my self-interest with my picks, here's something for my second life in tourism- I am just wondering how valuable such services would be in Turkey.

Reader Appreciation Day

I got two important reader comments early this morning, which I will adress later today.

Given my response to another reader question yesterday, I decided to declare June 24 "reader appreciation day" for the blog. But since I answer reader questions on other days of the year as well, I am not sure what practical implications this will have...
But I do want to emphasize that I really appreciate all the comments and feedback (+ and -) I have been receiving...

Wednesday, June 23, 2010

A Question on Current Account Deficits

Mr. Swine Flu decided not to leave; now, he is charging his Iphone. Maybe, I should leave, but I just decided to test my immune system, so a final post before I leave for my morning meeting at Hurriyet:
A loyal reader asked me the following question for Turkey:
What is the current account balance for Turkey? Is trade deficit an issue and how is it best addressed?
She was inspired by the ranking of countries according to their current accounts, where Turkey is at the very bottom.The first part of the question is easy to answer, and as always, a picture is always worth more than a thousand words:
As for the second question, the one-line answer is: Not as long as it is financed. That single sentence is not as innocent as it looks; for one thing, it reveals my view of International Macro. But I need to provide a detailed answer to my reader's question and rather than write a five-page expose, given the slacker I am, I will refer her to a summary that is more or less in line with my view.

In Turkey's case, the problem is rising from more of a chronic savings deficit rather than an investment boom, for which there is no easy fix.

Interesting Picks

Mr. Swine Flu is leaving, and I am still more or less healthy, so here are my international links:
The Economist summarizes the recent Cowen-DeLong fiscal boxing match.

I had this project to do a coffee table book on Monetary Policy some years ago. Actually, it wasn't mine; I was approached by a PR guy, but the project never materialized. One of our weird ideas was to question the assumption that Central Bank independence is a non-arguable pillar of Monetary Economics. I am glad to finally see someone taking on this idea.

The picture of the day: The South Americans are coming.

I was reading the mentioned Economist article on the plane a couple of hours ago; the inflation-deflation dilemma always makes interesting reading.

Dani Rodrik no longer recognizes the country where he was raised and spends most of his time when he is not teaching in the U.S. (subscription-only). Being a resident of that country, I would say that it had changed quite a while ago, but Dani has only recently been noticing...

My former employer has really turned nutty with emails.

EconNews Roundup

Your friendly neighborhood economist reporting from the Starbucks in Istanbul Ataturk Airport International Arrivals, at the risk of being diseased by Mr. Swine Flu sitting across me (see the great dangers I encounter to bring you this blog):

The number of high net worth individuals has increased 6.4% in 2009, according to ML. As in the Great Gatsby, the rich get richer, and the poor...

I knew the notorious all-inclusive system was endangering Turkey's tourism prospects, at least in terms of value added, but I was surprised to see the Cappodocians blame all-inclusive tourism of the Turkish South for their woes as well.

And while the Turks are vying for European tourists, Europeans want more Turkish tourists.

It is as if the opposition CHP's top brass has heard my recent complaints that no one knows what the party's economic agenda is. I was planning to do a post on my take on Kilicdaroglu's comments on CHP's economic policy, but to get start, you can read the news piece, translated from Daily News' sister (or rather big brother) Referans.

TUSIAD head says that more intellectual property rights is needed for foreign investments. Definitely, but given previous work on Turkey's binding constraints to investment, which I have referred to numerous times, as well as my impressions from managers, I doubt IPR should be the first priority. And by the way, anyone who has seen some decent econometrics would be very skeptical of cross-section-reeking remarks such as "a one point rise in the annual International Property Rights Index [IPRI] score predicts a 27 percent increase in foreign direct investment and a 57 percent increase in the re-investment of a previously implemented project"...

Last but not the least, my neighbor (in the Daily News time-space) Erdogan Alkin, who, among his many attributes, has brought up the great Turkish economists the Alkin Brothers, argues that being a world leader is not easy.

Tuesday, June 22, 2010

Interesting Picks

It is crazy to argue with a Nobel Prize winner, but contrary to Krugman, I still believe that all debts are equal, but some debts are more equal than others, so it doesn't really make sense to put Spanish and German debt at the same graph to argue it is not the debt. It is the absorption capacity, baby, and I am no Auesterian...

To regulate or not to regulate; that is the question.

Yet another paper I'd like to get my hands on ASAP.

Yes, my life evolves around tradeoffs as well, but I did not know why until today

An economist/blogger's take on Turkish integration in Germany. BTW, I am sure that the doner kebap (gyro for Greeks) was not invented in Germany:)

One of the better pieces I've seen on global imbalances. 

Freight fright back on radars.

Monday, June 21, 2010

Weekly Hurriyet Column: For South Africa, the vuvuzelas blow

Below is the unedited version of my column for this week. You can read the final version at the Daily News website, but since I have been editing my columns myself on the Daily News website since March, you won't see much of a difference between the two. The title is obviously inspired by Hemingway's great novel- not as perfect an ending as The Sun Also Rises, but still one of favorites; one of those novels I wish I could read for the first time again.

Coming to more serious matters, I'd like to apologize for taking some time to post this. I was planning to post it early in the day, but somehow the hyperlinks mysteriously disappeared, and a few of them, such as the digging reference in the second paragraph, were absolutely necessary to understand and appreciate the piece:)
The heat has made me less chatty than I usually am, so on to the column:

If it were not for the instrument from hell and a very disappointing World Cup, I might have never got to look into South Africa’s economy and its currency, the rand.

Originally developed to kill time during boring spells and mentally shut off the vuvuzela noise in World Cup matches, my most recent pastime began to turn rather interesting when I discovered a fascinating relationship: Since the Lehman collapse, the lira-rand exchange rate has been correlated with the VIX index, a measure of the implied volatility of U.S. stock options, often touted as the markets' fear gauge. One of my favorite economics one-liners is correlation is not causation, but when you dig a little bit deeper (but not as deep as Bilica), even more interesting facts emerge about these two currencies and economies.

Most notable is the difference in trade structure between the two economies. South Africa is a major commodity exporter, with 60 percent of the country’s exports (making up 12 percent of GDP) in commodities. Moreover, a significant part of its commodity exports, such as the platinum group and iron core, is used in industrial products and thus move in tandem with the global growth cycle. While the rising price of gold in bouts of risk aversion would somewhat counterbalance, it too is surprisingly cyclical.

Turkey, on the other hand, is a significant commodity importer, with oil accounting for more than 10 percent of the country’s imports. According to a back-of-the-envelope calculation Turkey economists know by heart, a one-dollar fall in oil prices improves Turkey’s current account by about $400 million. The different role of commodities in the two countries’ trade bill means that any movement in commodity prices would push their balance of payments in exactly opposite directions. Given continuing fiscal worries and questions over a double dip recession, both of which could send commodity prices lower, the lira looks better-placed than the rand.

Foreign positioning seems to work in the lira’s favor as well. For one thing, according to Emerging Portfolio Fund Research, or EPFR, a company that collects data on fund flows, real money investors are still overweight in emerging markets despite some selling during the past month. But both EPFR data and banks’ recent polls with their real money clients show that such funds are underweight-Turkey, whereas they are in a more or less neutral position in South Africa.

The relative position of real money funds is reflected in bond markets. Whereas the South African market has seen significant inflows over the past year, inflows into Turkish bonds have been more muted. It is therefore natural to expect the lira to be more resilient in bouts of sell-off, and that is exactly what has happened recently. Despite the bleak global outlook, foreign investors bought net 1.5 billion liras of bonds in May, increasing their share in the total bond portfolio to 10.8 percent. Unsurprisingly, South Africa’s balance of payments is more dependent on portfolio flows, making the rand vulnerable to outflows associated with global risk aversion and volatility.

This is not to say that the lira is shining. As I have argued many times, it seems to be overvalued in almost all measures such as the external financing outlook, internal and external equilibrium dynamics, its long-run real trend, or even the Economist’s Big Mac index. But I have found at least one currency it is sure to pound, at least in times of risk aversion, as it manages to come on top in this tale of two currencies or two-country beauty contest.

By the way, according to the Hear the World Foundation, extended exposure to the vuvuzela can lead to permanent hearing loss.

Emre Deliveli is a freelance consultant and columnist for Hurriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at

EconNews Roundup

The Daily News is reporting an EU study that finds that Turkey is increasing its trade relations with the East. I have not read the article (or plan to read it, given I am already way behind in readings), but one small comment I will make is that much of that is a "crisis effect" rather than a structural shift...

Agricultural exports on the rise: The fact that revenues is up while tonnage exported is the same (compared to last year) means that there is a shift of products exported and/or prices are on the rise.

According to a recent poll, Turks travel less than peers and spend less when they travel. But the problem is that the peers are not peers; the survey seems to have been mainly conducted in developed countries. I would be curious to see how Turkey fares against its real peers in the middle-income category.

Last but not the least, here's what your friendly neighborhood economist has to say for this week. Since there were a lot of columns today, my piece got pushed from the main and Economics pages to the op-ed section, so it is tough to find on the paper's page. And of course, I will post it to the blog later on. Finally, I need to figure out why the hyperlinks got erased; I swear they were there in the morning...

Interesting Picks

I honestly had not seen the recent Econbrowser post as a public choice theory of the IMF:)

DeLong touches on a micro-macro link that has often made me ponder.

I have wanted to look at the relationship between Turkish consumer sentiment and spending for a long time, but I'll just have to live with the US version for now. But just remember not to get carried by the idea of self-fulfilling expectations too much.

Another is the relationship between capacity utilization and unemployment, but the US version will again have to suffice for now.
The Week in Pictures, thanks to Econompicdata.

Sunday, June 20, 2010

Impact of EURUSD on Turkey's trade balance

Given the euro's dire straits against the dollar, I've been getting a lot of questions on the impact of EURUSD on Turkey's trade balance:
You get a nice mirror image that seems to answer the question if you graph the country's trade balance and EURUSD:
As Turkey's exports are mainly in dollars and its imports in euros, the above picture does seem to make sense. But as I often say, correlation is not causation. For one thing, Turkey's euro-denominated exports and imports are more or less equal, as you can see in the graph below.
This means that, as my friends at Global Source/ Turkey Data Monitor summarized recently in their quarterly report, the valuation impact of euro weakness on Turkey's trade deficit is NIL (caps are mine). As they also note, this can be seen by looking at the relationship between EURUSD and export and import price indices:
However, this is not the whole story. Volume effects could be widening Turkey's trade deficit with the Euro Area, but I don't see this happening because, again quoting my friends at GS/TDM, as long as lira's real effective exchange rate does not appreciate much, trade diversification should contain the damage. Let's see how we are doing on that front:
I just watched New Zealand tie Italy, so as they would say, no problem mate!

Saturday, June 19, 2010

Roubini Post: Taking the Ankara Horse to Water

This post already appeared in the Hurriyet Daily News on May 30; Europe Economonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

By the way, it was apparently put at the Roubini Global Economics website late Friday afternoon (EST), but somehow it did not appear under my RGE website (and it still does not all the time, I have no idea what's going on). Therefore, I noticed that it was published on Wednesday (June 23), but I am posting it with the original publishing date for archiving purposes.