Thursday, October 28, 2010

Addendum to Hurriyet South Weekly Editorial

For some unexplained reason, my South Weekly editorial got swapped to the front page of the HDN&ER instead of my regular weekly column. And since it was about Economics as well, many of my loyal readers thought that it was the regular weekly.

But, as I told the HDN&ER web editor, it all turned out for the better, as the tourism piece was much easier-to-read than my regular piece, which are usually kind of technical for the average reader. In fact, I got + feedback in the form of a comment on the HDN website and a couple of emails. The comments make some important points, which I would like to address now:

A reader noted in an email (not disclosing names because I have not asked for permission):
I'm not sure whether we can just blame macro-economic developments for the downmarket tourists who come to the resorts nowadays. Although some tourists in Istanbul are eccentric, we don't get bunches of yobbos (lager lout synonym) as you do in Marmaris and the like. This is because these people are attracted to beach holidays. It was always so and when I was a teenager and went on family holidays to Spain, such people were around then. Of course price comes into it and if Emre hotels were in the Seychelles you might get less of the chavvy crowd but even chavs have money nowadays (aka Mr Rooney) so even that's no guarantee.
Sure, there is the "culture effect" as well, but controlling everything else (a term economists love), the lower your prices, the more likely you are to end up with lager louts. For example, Dogus owns the Mares Select on the way to Datca, a premium hotel charging a couple of hundred euros a night at least. I am sure they have to deal with less chavs than our place. Or I am sure even the Grand Azur, a five-star hotel almost a stone's away from us, has less yobbos. BTW, I am just practicing my new vocabulary, in case you are wondering:)...

Speaking of linguistics, a friend who grew up in the U.K. asked me what the following phrase meant: "'ave a butchers at ya tattoo then luv?" After learning English rigorously in high school for 7 years and spending more than a decade in the U.S., I am ashamed to say that I had no idea what this meant. It is supposed to mean "May I have a closer look at your tattoo ma 'm?"

But it is also important to make a disclaimer here: The same friend was asking whether a more refined customer wouldn't benefit more from E. Hotels? They surely would, and some of our guests are really nice middle-class guys from the U.K. It is the tattooed thugs (another new word) that spoil the mix. In fact, we get a lot of intra-nationality complaint during the season, and a couple of guests writing reviews over at Tripadvisor explicitly stated they were ashamed of their countrymen. Just so that you don't think I am being racist or anything:)

Anyway, to come back to serious matters, the same reader wrote about the employees as well:
As for the low cost employees...I agree with you about the seasonal element. The waiters who work near my house here are rather cool and know how to behave whereas when I went to Marmaris and was unaccompanied, I was harassed constantly by off duty (and even on duty) waiters. I'm not even sure the efficiency wage theory would help improve their manners. Ignorant is ignorant I'm afraid.
She is again partially right: I agree that even if you increase the cost of getting fired, you would not avoid shirking all the time. For one thing, I have come to accept that part of it is just ignorance, as the reader notes. But by paying higher wages, you can also attract more skilled/less ignorant workers, at least in the long run. But much of the problem is just the seasonality: You just can't hold on to the decent workers, who would prefer a hotel open year-around.

Finally, she proposes the obvious solution:
If I was a hotelier I would probably no longer follow the all-inclusive package and try to find some way to lure the punters to me promising a little extra quality for a slightly higher price.
She is definitely right, but that is unfortunately much easier said than done, especially if you are located in a town with too many hotels like Marmaris. Almost all the examples of hotels doing that don't have competition hanging on their head like the sword of Damocles. But I will have more to say on this issue below.

Moving on, another reader commented to the HDN&ER website:
The small town I live in (30 mins from Marmaris) is struggling to cope with the high valued lira, all inclusive hotels and the rise in food costs, rents etc. Quality of staff and client base has deteriorated constantly over the last 14 years and other than the 6 weeks (annual Brit holiday time) the whole sector is lucky to make a profit. The South West needs support from the government before the tourism sector is totally at the mercy of the major foreign tour operators.
It is nice to hear I am not alone:)... But I am not sure what kind of support would be appropriate. Cheaper electricity would certainly help, for example, but with the recent alcohol tax hike, we seem to be getting exactly the opposite. Well, we would have thought better before voting "no" in the Referendum:)...

But I see such as only partial solutions. Over the long haul, the hotels need to get their hand as strong as the tour operators, but that would only be possible through cooperative action. But game theory tells us that when the game is not repeated a lot and monitoring is limited, tendency to deviate would be very high. That's where government monitoring and support would be very useful. This is something on which I have been pondering of late and hope to share my ideas once I make them a bit more concrete.

Anyway,  another reader who wrote a comment to my blog says the following:
This is the story of last 20 years of the tourism in Turkey. For one reason to another hotels in the south and even in the cities have been manipulated by the tour operators, run by non financial operators and lost profits under all inclusive packages. Quantity is certainly important to keep the sector alive but we certainly need some strategies & planning for the mid and long term.
The last sentence is key. As I also hint above, that's what government support should be about. Not handouts, but long-term planning to help the sector move up in the value-added ladder. Of course, the key question is how, and I would like to devote a South Weekly editorial exclusively to this issue in the next couple of months...

Wednesday, October 27, 2010

Roubini Post: Turkish Budget: Missing Deeds and Eastern Promises

This post already appeared in the Hurriyet Daily News this week; Roubini Global Economics 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...

There is also a blog version, along with an addendum, it is not different from the Roubini post, as the able editor there has been able to squeeze my additional comments below the article.

On a separate note, I am really feeling blue now, to the point that I could easily pass for a fat Na'vi kid over at Pandora:  I just learned that the Finance Minister is not actually expecting Besiktas to win the UEFA and Super Cup titles (see the end of the article). They hiked the alcoholic beverages tax instead.

BTW, this way, the Fin. Min. officially kept his promise of "no new taxes in 2011":)...

Monday, October 25, 2010

Hurriyet South Weekly Editorial: The dismal science for a dismal sector

As I announced last month, I will be writing an editorial for South Monday, Hurriyet Daily News and Economic Review's weekly supplement about the Aegean and Mediterranean coasts once every four or five weeks. The most recent one, which is appearing at today's issue, is below.

I have a couple of addenda to the column:

First, although I did not want to get into this in the column (I did not have enough space, either), another side-effect of the low-cost tourism is that you end up with low-cost tourists! Although I do not have hard evidence to support it, this is probably one of the reasons revenue-per-tourist figures are on the decline- that the profile of the tourists is changing as well. When you end up with guys unlikely to ever eat outside of the hotel or shop for anything, no wonder shop, restaurant and bar owners are complaining as well (Footnote: the shops have nevertheless other problems; there are just too many of them- which convinces me even more that the invisible hand is not working perfectly here- auctioning off a limited number of permits would have been much better: this is the standard problem of negative externality and the tragedy of the commons, but I have digressed too much- maybe, this should be for next month's editorial). 
Besides, the hotels have serious problems with some of the younger tourists- all alcohol-related incidents such as fisticuffs, damage to hotel property and even an incident or two of indecent exposure. In fact, having learned American English, I had not heard of the word Lager Lout until an elderly British couple complained of being disturbed by these guys.

In sum, the low-cost tourism is having side effects other than squeezing the hotels' margins.

Second, the employer-employee relationship has turned into a vicious circle: The employers, already operating under low margins, are not willing to pay more than the bares-minimum to their  low-skilled employees. Employees are then more likely to shirk, which, when observed by the employers, makes them even less likely to go for an efficiency wage. Now, does any micro. theorist want to give modeling this a shot?

Last but definitely not the least, credit where it is due: The graphs below are compliments of my friends at Turkey Data Monitor. I am testing the v2 of their program, which should be out soon... BTW, I had already reviewed the v1 of the program, in case you are interested.
Anyway, on to the article:
I have been seeing quite a few glowing articles on the tourism sector of late. As a disciple of the dismal science, it is my duty to relay my observations from working part-time at our family-run hotel in Marmaris, using the tools of Economics where possible.

First, as I argued in my first editorial for the South Weekly, the all-inclusive system, a direct result of the unplanned expansion of the last decade, has squeezed margins to such a point that it is only possible to make ends meet via economies of scale. As a result, especially smaller hotels have no choice but to bring down expenses, resulting in a services sector without decent service.

To add insult to injury, not only is it difficult to attract decent staff at the meager wages, hotels in seasonal resort towns are usually stuck with lower-quality workers, as the skilled are picked by hotels open year-around. This is what economists call the adverse selection effect, and there is no easy fix. The simplest solution of paying higher wages to prevent workers from shirking, referred to in the economics literature as efficiency wage theory, is unfortunately not possible.

Global developments in the sector have been working against resort hotels as well. Although tour operators have always been stronger on the bargaining table than hotels, recent bankruptcies of several operators as well as mergers and acquisitions in others have turned an oligopolistic sector into one of near-monopoly.

In fact, there are now only a couple of British and Russian operators serving Marmaris. On the other side of the table are hotels operating under almost perfect competition. You don’t need an economics Ph.D. to figure out that the tour operators will be able to dictate their prices under this set-up.

Finally, macro developments have been very unfavorable of late as well. First, the global crisis hit some markets, notably Russia, hard, although lower prices did induce some to choose Turkey over the competition, causing an artificial inflation of tourist arrivals figures.
Moreover, the strong Turkish Lira has been working against the sector as well, as costs are in liras and revenues mainly in euros or pounds. As a result, although hotel costs’ were up only 6.5 percent yearly in August, once you adjust for the exchange rate, the “effective inflation” becomes 16 percent.
In this respect, Fed’s Quantitative Easing II will only make things more difficult, as a fresh round of capital inflows will keep appreciation pressures on the lira. This is definitely not good news for hotels.

I am probably the last economist in Turkey to advocate currency manipulation by the Central Bank of Turkey, or CBT. But I have also got my hands dirty enough to know that CBT President Durmuş Yılmaz’s advice to exporters of hedging against currency risk does not work for the tourism sector: Revenue flow is way too uncertain and balancing the books just too tight.

But Minister of Culture and Tourism Ertuğrul Günay is getting ready to celebrate the country hitting the 30-million-tourists mark. Surely he’d know better than me, so you might as well join the party.
* Emre Deliveli is a freelance consultant and columnist for the Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at

Just a small note: Twitter username change

I changed my Twitter username to EmreDeliveli from edelivel, so I am now at:

As you know, I have an inflated ego, so I just wanted to make my name more visible:)

My Facebook account is as it was:

Both accounts can be found by my name as well.

Other than my occasional ramblings, mostly in Turkish and about football, I post my columns to both accounts. I have also decided to carry on my miscellaneous interventions on the daily press to Twitter and Facebook.

Finally note that, Twitter is my default posting venue; I post most everything there first, but due to the Facebook Twitter application, they end up in Facebook in a few minutes as well. So you can follow me in Twitter, but as your friendly neighborhood economist, I would be more than happy to add you to my friends' list if you just let me know you are a reader:)...

Weekly Hurriyet Column: Missing deeds and Eastern promises

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 media webeditor since March, you won't see much of a difference between the two.
As for the title, I have not one but two cheesy movie references: One refers to a cheesy Adam Sandler movie, the other a highly-acclaimed one. I kind of though about paying homage to the recent excellent book by Rogoff and Reinhart, as I am criticizing the same "this time is different mentality" my movie buffness prevailed at the end.
Jumping right to more serious matters, I have two important topics worthy of an addendum:
First, the timing of the announcement of the MTP coincided with the release of strong September budget figures, but I think this was no coincidence. If nothing else, I have to accept that this government is expert at playing to the tune of the market and managing expectations. I mean, these guys managed to keep hopes of an IMF Stand-by afloat for several months.
In a similar vein, anyone familiar with the September budget turnout is probably wondering what  the hell I had been smoking while writing my column: The MoF-defined primary surplus was almost four times higher on a year-on-year basis. So the combination of the MTP and the September figures were enough to convince markets of the government's fiscal resolve.

Interestingly enough, the government has now around 80 billions liras of primary spending left for the last quarter of the year. Naive guys like me would just spend it all, but I believe the government will not go for the whole nine yards- just to impress markets further.

Secondly, as I mentioned before, fiscal policy is better suited to deal with capital inflows, so it would be a real pity if the government did not keep with its promise of fiscal moderation. That would make the CBT's job very difficult as well, as it would not be able to get support from fiscal policy.

Anyway, on to the column:

The life of a Turkish economist never gets boring.

First, the government started working on a fiscal rule, which, despite the enthusiasm from the academedia (my acronym for academics and the media) and analysts, your friendly neighborhood economist did not find conservative enough.

But even in its current form, and disregarding weaknesses in its institutional set-up such as the lack of an independent monitor, the fiscal rule meant that the government would have to enact some fiscal restraint in an election year. Then, it was only natural that Prime Minister Recep Tayyip Erdoğan shelved it in September, settling once and for all that he had the last say in these matters.

So imagine the surprise when the deficit figure for next year, which was announced in the Medium Term Program, or MTP, a couple of weeks ago, was around 5 billion Turkish Liras (roughly 0.4 percent of gross domestic product, or GDP) lower than what would have been implied by the fiscal rule.

Unsurprisingly, the market reaction was very positive, supported by emerging market euphoria on the back of the Fed’s imminent new round of quantitative easing. Equally ecstatic were analysts, all racing to be the first to praise the government’s commitment to fiscal discipline.

But as Murat Üçer of GlobalSource Partners and Turkey Data Monitor, one of the more cautious economists out there, put it, most analysts are ignoring the deeds and focusing on the words. What he means is that the government is more than 15 billion liras over the primary expenditure target in the original budget for this year. It is able to get away with this because the higher-than-projected GDP this year makes budget ratios look better.

In short, the market, analysts and academedia alike are selectively choosing to jubilate over the promise to rein in expenditures next year rather than worry about this year’s overrun. Such cherry-picking is perhaps fine, especially since fiscal restraint in an election year would be a first for Turkey.

The only problem is that the government’s track record at attaining announced fiscal targets is very poor. Maybe it’s just me, but I find it difficult to see why this time would be different, especially as the government is envisioning almost no real increase in non-interest expenditures.

Note that curbing such doubts was the whole point of the fiscal rule: It would have been a commitment device. The government would have solved the dreaded time inconsistency problem by tying itself to the mast in the spirit of Odysseus. So when the sirens sang the tunes of fiscal splurge before the elections, it would not have been able to pork-barrel even if it wanted to.

Then, tactless analysts like your friendly neighborhood economist, who are paid by the anti-government media to write in international outfits like Forbes and Roubini Global Economics to scare the foreign investors away, would have sulked and quieted down.

But not everything about the MTP is so grey. Although Finance Minister Mehmet Şimşek went short of saying read my lips, he was clear that there would be no new taxes in 2011. I was pleasantly surprised, as such knockoff measures are the most common temporary patches to the budget in Turkey, although they do more harm than good in the long-run: Not only ad-hoc tax hikes would be disrupting inflation expectations further, they would also create a false sense of fiscal responsibility.

Then, given the Minister’s excellent forecasting track record when he was a market economist, I can only deduce one thing from the expected increase of 33 percent from alcoholic beverage tax revenues:

Beşiktaş will win the Europa League and Super Cup titles, with beer and rakı flowing during the ensuing celebrations!

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

Friday, October 22, 2010

Yet more resolutions

My self-confidence has been hit big time and my ego deflated a bit by the negative feedback I have been receiving of late. So I came up with more resolutions:

I had not done for a while, I decided to dispense with my summary of the Turkish media. Not because I agree that those are miscellaneous interventions on the daily press, as the second discontent notes, but because I now think Blogger is not the perfect medium to relay those comments: I read interesting articles through the day, sometimes when I have free time behind my laptop, at other times, when I have nausea at night or during breakfast/lunch on my Bberry. It would be better to share those articles right  after when I read it, when it is fresh in my mind. 

This is the argument from the supply side, but on the demand side, I for on never look at such posts with many links in detail. But I have been increasingly using Twitter and Facebook to access interesting articles posted by prolific bloggers such as RGE, Econbrowser, Mark Tahoma, FT and the like... In fact, I am following more economists/bloggers than real friends in Twitter:)...

BTW, the same policy change goes for Interesting Picks, the global version of Econnews Roundup. I will not post those to the blog, but will tweet interesting articles right after I read them, along with a small comment. And BTW, my tweets automatically appear on Facebook as well, so you'll be able to see them in either.

So if you liked those links, feel free to add me to your Twitter and Facebook lists- you can find me with my last name in both, and my Twitter ID is edelivel. Just a small disclaimer: I do write in Turkish from time to time, but those are usually about football (soccer if you are a Yank). So you won't be missing anything if you don't speak Turkish. And if you do, when you see Turkish, you can just skip my tweet/Facebook status update if you are only interested in the Econ.:)

Coming back to the unhappy customers, one important point is that, as a friend recently noted, at the end of the day, the market will get what it wants: If enough people agree with them, I will either have to change or get kicked out of Hurriyet Daily News & Economic Review and Roubini Global Economics and other places I write for, as no one will read me and I will be erased from the media forever.

I am not saying this to note that I am not heeding their comments. It is just that their comments were not specific enough for me to take concrete actions. But even if I receive no additional responses, Adam Smith's invisible hand will make sure that the public will make me king or send me to the gallows...

The financial crisis has shown us that the invisible hand may not always perfectly in a macro setting. But in more micro circumstances, such as deciding whether Emre Deliveli should continue being an Economics columnist, it will work perfectly...

Thursday, October 21, 2010

The blogging game turning sour:)

I just got the following comment to a recent post:
Dear Mr.Deliveli,
As a regular reader of your blogpost, and of your miscellaneous interventions on the daily press, I am becoming increasingly convinced that you are using media space essentially to further boost your already highly-inflated ego, as you hardly ever say anything new or make a significant contribution. There is nothing wrong with expressing your views, provided you are fully aware of your young age, your credentials (which have not really been made public) and relatively limited experience, compared to the much more experienced academicians and established writers on economic issues, who possess long years of accumulated experience and credibility. So, please try to be a little more modest, if you don't want to end up talking to yourself only)
When readers used to email me and told me how much they loved my stuff, it was all fun and games (admitting I love flattery seems like accepting the charge of inflated ego, but it really isn't- more on that later), but first the unhappy customer to Monday's column and now this.

I could just ignore it, but as I said it before, if someone has taken the time to give me feedback, it is only proper that I respond. And since I am not sure whether she will get an automatic response from Blogger if I responded to the comment (it is after all anonymous), I will post it here, as she said she is a regular reader of my posts. The rest of this post will be a direct answer to her comments.

So here we go:

First of all, I sincerely thank you for having taken the time to write a response. I value all feedback. But having said that, I am really not sure why you think my ego is highly-inflated. Is it because of my foray into vanity that I mention in the post you have responded to? If that's the case, that was supposed to be a joke, and I apologize if you didn't see it that way.

I should note that anyone who writes in public space loves to be read. I don't think that should be a measure of my ego. A usual analogy could be made with the difference between price level and inflation: I am obviously thrilled when my column makes it to the most-read in the Daily News website. In other words, my ego rises, but if it is already at a low level, its level will have stayed relatively low anyway. If anything, I would classify myself as with a low-ego, almost to the point of lack of self-confidence, especially after I get unfavorable comments:). Maybe, that's why I get so excited when a column is well-read or gets good comments.

And if it is not my vanity post that induced you to think I have an inflated ego, I would be glad if you could let me know what else. Please be specific as you can so that I can properly understand what made you think that I have an inflated ego. BTW, a friend who is a regular reader (who has also given me valuable advice on the previous discontent) noted the following: "You seem to write with conviction and for me thats a very positive thing regarding your aptitude but that type of conviction and lets say dedication will always attract negativeness of some kind..." 
I fully agree with her on my writing style, but if you are indeed bothered by my conviction, I don't think it shows that I have an inflated ego at all. I really like writing this way because I could not really do that when I was an economist at Citi. Market economists, while they always say what their view is, tend to be more careful and reflect risks to their forecasts. They also tend to herd a lot, as the benefit of being a maverick thinker is not much for an analyst, but the cost a lot- unless you are a star analyst, of course. So you don't really know what they are really thinking. With me, it is simple: I expect x because of a, b and c... Anyway, I could offer more hypotheses on why you think I have an ego issue, but I'll just wait for your explanation.

Similarly, I am really not sure what you had in mind with miscellaneous interventions on the daily press: Were you talking about my Econnews Roundup posts. If that is the case, I really don't see them as interventions on the daily press: It is just me writing my opinion on the news of the day. Sure, I sometimes do criticize the person the news is about or the journalist who has prepared the piece, if there is something fundamentally wrong, at least according to my view, with the analysis. I think that is a valuable service to my readers, as I a saying, "don't jump to conclusions from this piece, as the analysis might be flawed"... But again, if you had something else in mind, please let me know.

I should also note that I don't think I have specifically attacked any academics and economic columnists in this blog ever. I have plenty of disagreement with the mainstream economics thinking in Turkey, but when I do that, it is always about an idea, and never about a person. Having said that, there is also nothing wrong with saying, I disagree with Prof. X on this. That doesn't mean that I don't respect X or think that I am better than her, whatever better means. As you also note, there is nothing wrong with expressing my views even if I am not as good as Prof. X.

Besides, even if Prof. X is has better credentials and more experience than me (and is older, but believe me, I am not that young, either), that doesn't mean that she will be right all the time and me wrong all the time. I might come up with more a accurate analysis on a particular subject even if she is overall a better economist if I know that particular topic better, by conducting a more diligent analysis, i.e. by hard work, or by sheer luck...

To illustrate, if you look at my track record, this is more or less what you get: I have been right on target in some instances (IMF Stand-by, Fiscal Rule) and been totally off-the-mark (CBT policy rates) in others. Having said that, it is obvious that some of my writings have induced you to think that I see myself above other economists. I would be grateful if you could point to those posts/columns and let me know specifically what made you think so- so that I can address the issue in detail.

Speaking of credentials, it is not that I have not made them public on purpose. It is just that the Hurriyet Daily News does not have a set-up for that. They do have authors' pages, but those only have past articles. I agree that they should, and I have mentioned it to the editor-in-chief and web editor several times. It is not that they disagree, but it is not high on the priority list. And while I would not want to post my CV to the web, especially since I am not looking for a job, I have no problem supplying my bio when a place I write for, such as Roubini Global Economics, asks for it.

And besides I don't think there is a direct correlation between strength of credentials, at least in the traditional or academic sense, and quality of analysis/writing. For example, some of my favorite Economics bloggers such as Mark Tahoma and Econbrowser folks, while decent academics, are not likely to get the Nobel Prize. However, I find their analysis and writing much better than many Nobel winners who also blog or write an occasional op-ed (no, I don't have Paul Krugman in mind, I think he is the best writer by far among the Nobeliers).

I should  add I know many bloggers who choose to remain anonymous for various reasons. A couple of quality economics bloggers who immediately come to my mind are Models & Agents and Rebecca Wilder (obviously not her real name). So I really don't think you should judge a columnist by credentials alone. But unfortunately, you don't seem to think much of my writing, either:(

I am obviously disappointed that you say that I hardly ever say anything new or make a significant contribution. It is true that I am not aiming for ground-breaking economics novelties in my columns; that should be, after all, for academic research. But I thought I was saying something new when I noted that the IMF Stand-by would never be realized. Or the fiscal rule had some flaws. The consensus view was exactly the opposite in both, so even if you'd disregard the fact that I ended up being right, there was something new there.

Maybe, you know the Turkish economy so well that none of what I say seems like novel to you. In that case, could you email me the links of a few columnists who, in your opinion, say something new and make a significant contribution?- I would prefer ones writing about Turkey, so that I can make a direct comparison, but really, anything is fine. It'd even be better if you could send me specific articles. I am really not trying to be a smartass; I just want to see your criteria so that I may aim higher and maybe even improve my columns.

In sum, while I do appreciate your feedback, I would really be really grateful if you could be a little bit more specific on the points I noted above. Feel free to write to the original post, to this one or even send me an email at

After all, I would not want to be talking myself only at all:)... But I just might if I eventually find out that enough people (it doesn't have to be the majority, just my subjective criterion) think like you or Tuesday's unhappy customer...

Wednesday, October 20, 2010

Roubini Post: Radical Views from the Street

This post already appeared in the Hurriyet Daily News this week; Roubini Global Economics Global Macro Economonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

There is also a blog version, but it does not add anything new to the Hurriyet Daily News article.

As for an addenda, I have a couple, but neither is about Economics: One is on my initial impressions of the new Radikal, the other my attempt at satisfying an unhappy customer...

Resolution on the Hurriyet columns

After having my columns labeled as lucid, wrapped in trivialities and unreadable, I had a brief midlife confidence crisis and sought opinion from readers via the blog, Facebook and Tweeter. I got several comments, which I have carefully digested and have come up with the following points:
  • The humor stays, people seem to love it.
  • But having said that, I should try to adjust the dose of the humor. If I am writing a technical point, it might make sense not get bogged down in trivialities and just make my point.
  • The same goes for the ramblings. It is fine in a simple topic, but it might just make the column more difficult if I am discussing a technical subject.
  • Simple is better, especially when dealing with conceptually difficult concepts.
  • This also means simple in terms of style: I try to build my column like a novel or a movie: Kind of slowly prepare the readers for what I'll say. But maybe I should just state my theme up front and then develop it. Incidentally, that was the what the editors at Forbes used to concentrate on a lot for my columns with them. There is probably some merit to that.
  • I need to try to be less ambitious: Rather than make six points in a column, with each point briefly explained in one paragraph, I should stick with less points. This goes especially for the more challenging columns- a good example would be my recent column on the Central Bank's policies. Or just ask for more space from the Econ. editors at the Daily News...
Let's see how this will all work out and if I will be able to stick to these promises. Because at the end of the day, I am suffering from the time-inconsistency problem that often features in my writings: I just love the humor, the ramblings and movie-like development of the column. So I am not sure how I will stop myself from these sins when I sit down behind my laptop to write my columns.

I guess moderation and variety are the keys. I admit that 36 hyperlinks in Monday's column might have been a bit too much. And if I am writing on a technical topic one week, I should restrain myself by saying that I will have my fun with a simpler column the following week:)

Anyway, thanks again to all who took the time to write out thoughtful responses.

Mucho obrigado...

Tuesday, October 19, 2010

Addendum to Hurriyet Column II: Unhappy customer

I had already done my first addendum before the column was actually published, so this is my second addendum:

A friend of mine once noted, after seeing a harsh review to one of my Hurriyet columns, that I should have a thick skin. After seeing the comment to my most recent column, she would have probably gone straight for an alligator skin:
Economics has another name "the dismal science" and it sure is a boring subject unless you bring it to life which you fail to do again and again.I try to read your articles because I am very interested in Turkiyes progress but you bore me to tears with your style of writing which is not lucid, being wrapped up in trivialities, simply unredeable.Sorry dont give up your daytime job as they say.
I do have an alligator skin in fact, but I saw George Costanza sink to a new low at Seinfeld this morning (the fur hat, Kenny Rogers chicken episode), so I almost had a midlife confidence crisis (no, I am not fat and bald), if it were not for my friend Emi... But I do really appreciate all feedback, and in fact - comments, as long as they help me improve, are more useful than + ones. That's why I simply send a thank you note to + comments while I try to to address - ones in detail (this is actually the second serious - comment, apart from the political ones over at Forbes, so I am still a rookie in that respect). So as a token of my appreciation (after all, she seems to be a regular), I will respond to this unhappy customer:

I do a agree that I ramble a bit during my columns, although I am not sure if that's what the reader means by wrapped in trivialities. But many readers also note that they like the humor. Maybe, I need to try to adjust the dose of the rambling from one week to the next, as Emi was suggesting. As she notes, some can be short, brief, to the point and others pieces where I feel strongly about certain issues I can ramble to my heart's content. Makes sense, but more easily said than done...

Maybe, I really overdid with the hyperlinks this time around (I counted 36, including the signature files at the end). But the hyperlinks serve two purposes: Some, like the cheesy movie quotes, just provide humor. I could easily dispense with those. But others are crucial, as they make the column accessible to more people, and that brings me to the point on lucidity and readability.

It should have been obvious by now that I am not the people's economist, Turkey has Gungor Uras for that. Not that I would not want to be one, if the economics Ph.D. and Mr. Uras' Ayse Teyze, the equivalent of Japan's Mrs. Watanabe, the housewife who trades FX from home, equally enjoy your columns, then you are at the apex of your career as an Econ. columnist. I am not that good! Even if I were, I could never do that in my 650-word slot...

So I choose to do the following: While you'd need quite a bit of Econ. background to breeze through my articles, the hyperlinks are supposed to help mere mortals out. Let me illustrate with a few examples with yesterday's column: I did not have enough space to explain inflation targeting, so I just linked to the Wikipedia article on that. I would need at least a couple of paragraphs on how the IMF revamped its crisis prevention facility, so I just linked to my article from last year on that topic. The benefits of inflation targeting in Turkey would deserve a separate column, so I just linked to a recent Hurriyet column of mine, where I had taken on the issue. And so on and so forth....

This is all well, but I doubt the unhappy customer read my column in the hardcopy and then went to the web to specifically write me an answer: So I am wondering if she looked at the hyperlinks. I am not saying this to criticize her; maybe, the hyperlinks are not just working as I had hoped- maybe, people just don't like using them while reading the article, although those complimentary readings are one of those little things I just love about the FT. Or maybe, she had something else in mind when she noted that my columns are not lucid, and simply unreadable.

Maybe, I am making too much out of this. Many Turkish columnists get a lot of - comments and hate mail, even more than praises and + comments. But at the end of the day, my policy, even at Tripadvisor where I write reviews for our hotel, is to be polite enough to respond if someone has taken the time to write comments, even if those comments are not what I would have liked to see.

In that manner, if you have anything to say about my columns, please feel free to do so, either as a comment to this post (anonymous or not, both are fine) or an email to But please be as honest as you can; after all, I do have an alligator skin and I can definitely handle the truth!

Monday, October 18, 2010

Weekly Hurriyet Column: Radical views from the street

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 media webeditor since March, you won't see much of a difference between the two. 

Speaking of Radikal, I have read three issues (I am again late with putting up the column at the blog), and so far so good... Two small comments: 

First, I sense some confusion  by the columnists on the meaning of street columnist: I really don't think it should mean "actually going on the field and reporting from there". I think it rather means squeezing some journalism into the analysis, such as reports of what the experts are thinking. In the econosphere, I think Gillian Tett does that really well. BTW, I tried to do that at today's column by reporting my perceptions from the recent meetings I attended. One customer was not particularly very happy, but it seems she had issues with my former stuff as well:( BTW, I do care about all the feedback, + or -, so I will have a response for her later today or tomorrow

Second, I find their sports section a bit weak. The news are OK, but not too many hot-shot columnists. But there was a great Hayko interview on Sunday and Monday nevertheless. 
Last but not the least, the columnist podcasts/videocasts are great, although it was kind of one of the pillars of a new Econ. web site I am starting up with a few friends, so we are not amused:) And they have one of the better Blackberry applications out there. In sum, while I would  not call their web page radical, it is certainly quite good.

Anyway, on to the column:

Our sister (or rather big brother) daily Referans merged with Radikal yesterday, a paper undergoing significant changes itself.

Their editor-in-chief has been particularly raving about how he intends to change traditional op-eds by molding your average newspaper columnist into a terminator he has named “the street columnist.” I have been to quite a few conferences in the past few weeks myself, as well as talk to people who have been to others, so I am in the perfect position to relay my impressions from the street.

At the IMF-World Bank Annual Meetings in Istanbul last year, uncertainty on the macroeconomic outlook was the name of the game, with endless debates on the shape of recovery. That kind of ambiguity has decreased considerably, although some party-spoilers like the great Roubini continue to muddle the future. But that does not mean that the horizon is crystal-clear; macroeconomic clouds have simply given way to others.

The most-discussed of these new uncertainties is arguably woes of a European kind: I sensed a great deal of pessimism on the Euro Area, whether it be short-term fiscal worries or long-run structural problems like declining competitiveness and fallback in innovation. On the contrary, there is quite a bit of optimism on the U.S. economy. Even those opting for a more wary outlook believe that as long as employment prospects do not improve, American policymakers will continue to support the economy every way that they can.

And that brings me to Fed’s Quantitative Easing II, which is just around the corner. Many economists, including PIMCO’s Mohamed El-Erian, are critical that it will work. Their main reasoning is that investors cannot be bribed into equities; nor can banks be induced to lend by flushing them with liquidity. Agents will take risk if and only if it is attractive for them to do so.

Then, all that money for nothing will end up somewhere else, and judging by the preemptive strikes, that somewhere looks like commodities and emerging markets. As a result, positions are being built by speculators, and battle lines in the form of currency wars are being formed by policymakers. There is even the worry that there might be another Great Trade War in the making.

In the same vein, there is quite a bit of debate on the future of policymaking, which has already undergone many changes. The International Monetary Fund revamped its crisis prevention toolkit this past year. It was also quick to depart with its well-established mantra by advising fiscal easing for the developed world and capital controls for emerging markets. But now policymakers have taken those radical changes a step further by putting central banking on the spotlight.

Given the financial crisis, it is not startling that there is a lot of discussion on whether central banks should be in charge of financial regulation as well. But I was taken by complete surprise with doubts about inflation targeting. What started as an innocent pissing contest by the European Central Bank, as they claimed their two-pillar approach was superior to inflation targeting, has morphed into something much more sinister.

Economists and policymakers alike are well aware that an inflation-targeter faced with free capital flows is more or less helpless against appreciation pressures on its currency. But they are ignoring the benefits of inflation targeting for the likes of Turkey, or not coming up with an alternative, as one Central Bank of Turkey official lamented in a quick chat over coffee at the Global Economic Symposium in Istanbul.

This is your friendly neighborhood economist reporting radical views from the street…

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

Sunday, October 17, 2010

Addendum to unpublished column: My take on the new Radikal

This is a first: I am writing an addendum to a yet-unpublished column. While this week's Hurriyet Daily News column won't be out until midnight (they have  automatic publication), part of my additional comments are not about the column at all and therefore, I don't need to wait for the column to get published. 

As you'll see in a few minutes, or whenever you have a chance to read the column, the motivation of the column is the new format of the Turkish daily Radikal, which is undergoing significant changes. I am interested in this development solely because my favorite daily Referans was gobbled up by Radikal; it had its last issue on Saturday, but some of its journalists and columnists will be working for Radikal from now on.

I was quite enthusiastic with this development, which was public for some time, mainly because Radikal and Referans already had most of my favorite Econ. columnists. Besides, as I detail in my column, the Radikal editor-in-chief has been promising radical changes to op-eds and columnists, so I was wondering how it would work in practice. So I bought the paper first thing in the morning, but could have a look at it only an hour ago due to a busy day, which involved varied activities such as writing my Hurriyet column, writing up responses to reviews at Tripadvisor as well as ordering fruit and vegetables during my moonlighting stint as a purchase manager. Here are my first impressions:

The Format: Love it. I have a always been clumsy at reading the paper at tight spots or when it is windy, at which most Turks excel, so the small size really helps me. It could even have been a bit smaller, maybe the size of WSJ Europe.

News: Quite rich, but this was a weekend issue, so we'll see how it does during the week.

Columns: I know who is writing, so no surprises there, but it seems they are really straining to fit the editor-in-chief's "street columnist" concept. Either they'll catch up, or he will cave in, or...

Speaking of that, I am not sure what the guy really means by that, but he is supposed to be a whiz-kid from Harvard, so he might be on to something. Besides, I recently read a McKinsey report saying that opinion pieces and analysis would overtake traditional news in the next decade, so it would not hurt honing my columnist skills.Therefore, in my column, to be released to the web in just a few minutes, I tried emulate my understanding of the concept.

The way I see it, there is great potential for opinion pieces also reporting from the field- analysis and journalism in one. The Economist does that quite well more often than not, and if you are looking for individual names, the first two that come to mind are NYT's Thomeas Friedman and FT's Gillian Tett. Unfortunately, I don't know of any Turkish names that do that as well as these guys. But maybe I am totally off the track, and "street columnist" means something else...

Wednesday, October 13, 2010

Roubini Post: Economist Wars: The Turkish Ratings Wars

This post already appeared in the Hurriyet Daily News this week; Roubini Global Economics Emerging Markets Economonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around...

There is also a blog version, but it does not add anything new to the Hurriyet Daily News article.

Ass for an addendum, almost  nothing- except my foray into vanity again...

Tuesday, October 12, 2010

GES Session II: Reassessing Central Banking

The participants at this session were:

Edward Lazear, Professor of Human Resources Management and Economics, Graduate School of Business, Stanford University
Assar Lindbeck, Professor of International Economics, Stockholm University
Suzan Sabancı Dinçer, Chairman and Executive Board Member, Akbank
Jürgen Stark, Member of the Executive Board, ECB
Durmuş Yılmaz, Governor, Central Bank of Turkey

The moderator was Wolfgang Munchau, Co-Founder and President; Eurointelligence; Associate Editor, Financial Times

Since this session was off-the-record, I'll report on what was being said, but not who said what. Note that I had posted earlier my interview with Jurgen Stark, one of the participants of the session.

The idea of the session was to reassess central banking in the aftermath of the financial crisis. In this vein, the discussion's objective was to answer the following questions:
  1. Will central banking be the same after the "Great Recession" as it was before?
  2. Should monetary policy react to housing markets and asset price bubbles?
  3. Are two or more pillars (i.e. central bank policy rules) better than one?
  4. Are central banks the best banking supervisors?
  5. What are the potential tensions between monetary policy and banking supervisors?
  6. Are quantitative easing and other unconventional policies adequate instruments during recessions.
This session was one of the most controversial I had attended, as there was much disagreement. In fact, the first question was the only one with "consensus-building": All the participants more or less implied that central banking would not be the same. But their perception of where it was headed differed a lot, as my summary of the answers to the other five questions will attest to:

The second question is really three questions disguised as one: First, we need to determine whether central banks can indeed predict asset price bubbles in advance. According to Alan Greenspan, former chairman of the Federal Reserve, who many see as one of the main culprits of the crisis for not having touched the U.S. housing bubble, we cannot.

Obviously, if you agree with Mr. Greenspan, then your answer to the second question is definitely a "no". But even if you believe that a central bank can identify a dangerous bubble forming in advance, it doesn't mean you think it should prick it.

For one thing, it is not clear whether a central bank would have the adequate tools to prick a bubble. But even if it has, it would run the risk of losing its credibility by creating a downturn by pricking the bubble. It might be true that if the central bank had not intervened, things would have been worse. But the problem is that that state of the world is not observed.

Coming to the question of the pillars, that's where inflation targeting got a lot of of critique from one of the discussants, who thought that one of the lessons of the crisis should be that inflation targeting was not the best central bank policy over the long haul.

The European Central Bank's, or ECB, two-pillar strategy of money and prices were given as an alternative to inflation targeting. In fact, related to the previous question, it was argued that the ECB's consideration of money and credit in its monetary policy strategy had enabled it to lean against the wind in the face of unsustainable financial trends. The argument goes that, since financial imbalances are associated with strong credit and growth aggregates, central banks can use them rather than try to target asset prices directly.

So far so good, but I am missing something in this argument, maybe because I am not a monetary economist. Namely, the critique I outlined is based  on a very canonical New Keynesian model, where money is deemed redundant for the monetary transmission mechanism. However, you can extend this basic model to account for money and integrate money into an extended Taylor rule. For an example of what I have in mind, have a look at this paper.

Note also that there is not a binding "central banker constitution" that prevents an inflation targeter from watching over money and credit. The Central Bank of Turkey, or CBT, does that all the time, and their recent normalization actions, which I summarized in my Hurriyet Daily News & Economic Review column a couple of weeks ago, are partly in response to monetary and credit developments.

But if you'll explicitly target money or credit, you had better have the appropriate instruments to do so. This is the famous Tinbergen rule, which simply states that you need to have at least as many policy tools as targets. For example, if you targeting both inflation and unemployment, you need to have at least two tools. But you can cheat the rule somewhat by having your instrument respond to a linear combination of targets, that's what the Taylor rule mentioned above actually does.

I know I am starting to get boring, so just a small footnote to make this discussion more interesting: Dutch economist Jan Tinbergen, who is named after the rule, won the first Nobel price in Economics back in 1969. Not to be outdone, his brother Niko won the Nobel in Physiology or Medicine a few years after him. They have there more siblings who, surprisingly, did not get any Nobels:)...

Turning back to the matter at hand, a good starting point for the next two questions, 4 and 5, would be the Tinbergen rule. Since central banks' sole instrument in shaping their policies is the interest rate, they would need a second policy tool if they were to target financial stability in addition to price stability. This second set of tools is regulatory or supervisory powers.

So far so good. But there are quite a bit of complications with combining monetary policy and financial regulation at a single body. For one thing, this may produce an inherent conflict of interest. Can a Central Bank having to work with banks for the smooth operation of monetary policy be equally diligent in making sure the balance sheets of the very same banks are strong enough? In fact, a recent column from a Turkish ex-Central Banker illuminated me that this was the exact same worry that led to policymakers at the time for an independent agency for banking regulation and supervision.

But there is a simple way out of this dilemma. It is possible to leave the regulation of individual banks to another agency and have the Central Bank take over macroprudential regulation. But even then, there are serious issues that need to be resolved.

For one thing, what if there is a conflict between price and financial stability? Then, striking the right balance between the two would be a very delicate task, with the danger being that neither would be satisfied and the central bank would lose credibility as a result.

Secondly, combining the lender of last resort with the macroprudential regulator could result in what economists call the time inconsistency problem. In our context, this means that even though a central bank is committed to running a tight ship in terms of macroprudential regulation, that commitment has no meaning, as the bank will have to flush the system with liquidity when the crisis means. But since this is known in advance, the central bank's financial stability arm has no muscle.

By the way, if I am starting to sound boring again, note that Kydland and Prescott won the Nobel Prize in economics for their work on the time inconsistency problem back in 2004, although Odysseus of Ithaca knew the solution to the problem a couple of thousand years before them: He tied himself to the mast of his ship, as he knew that he would be lured by the sirens. In other words, he ruled out beforehand time-inconsistent policy by literally tying his hands.

Coming back to serious (and boring) matters, there is also the danger that the public may not like such great power at the hand of unelected bureaucrats and the politicians may be too tempted to temper with such an all-powerful central bank. Note that even without much power over financial stability, the Central Bank of Turkey has been criticized a lot by ministers in the past couple of years for supposedly keeping the interest rates way too high and the lira appreciated.

These disclaimers on combining monetary policy with regulation necessitate another footnote: As you can see, a lot depends on the credibility of the central bank and the country in question. The three issues mentioned above might not be a big deal for a credible central bank operating in a credible country with a history of price stability, where it is taken for granted that the central bank will not be pressured or meddled with by the government. But they may be the route for permanent loss of credibility and recipe for disaster where price stability and central bank credibility hangs in a dangerous balance. 

So maybe the moral of all this is that there is no single answer to these questions. They should be answered under the context of the central bank and the country in question.

Last but definitely not the least, on the issue of quantitative easing and other unconventional policies: The question of adequacy did not get much attention, as with interest rates at record-lows in the developed world, there is not much else to do. The discussion rather focused to the implementation of timely exit strategies, and here there seems to a difference of opinion between the U.S. Fed's hold-for-longer and ECB's more cautionary approaches.

Now that I have duly reported the session, let me share my single disappointment with this extremely thought-provoking discussion: Most of the discussion was based on developed country monetary policy. The little developing country / emerging market, or EM, discussion focused on Turkey, as two of the discussants wereTurkish.

That was a shame, as EM central banks are dealing with slightly different, but equally challenging, problems. For one thing, a timely exit is much more important for them, as, contrary to their kinsmen in developed countries, they are already starting to see signs of overheating in their economies. Therefore, exiting before the developed world means rising interest rate differentials a flow of fresh money to these countries.
OK, but why worry, you might wonder. The problem is that the inflows to EMs are causing their currencies to appreciate- this is the background of the currency wars theme that has taken so much attention of late, especially during the annual IMF-WB meetings.

The question for the central banks and/or governments is whether they should respond to such currency appreciation pressures and how. Some countries have started to implement capital controls. Others are just buying up foreign currency as if there is no tomorrow. The Central Bank of Turkey introduced quite an ingenous scheme just after the GES meetings. As a longer-term, institutional solution, it has also been suggested that the standard Taylor rule should be enhanced to account for the exchange rate as well. 

This EM perspective is really an interesting angle, but it was disappointingly absent from the discussion. But maybe there is only so much you can talk about just over an hour...

Monday, October 11, 2010

Yet more vanity, my favorite sin

As I always say, a picture is always better than a thousand words:
HINT: Just have a look at the list of the most popular articles- this is supposed to be all the articles, i.e. news+columns & op-eds.

But one thing that's eating me is the relative lack of comments: Although I manage to squeeze into the Daily News top ten list more often that not, I never get a lot of comments to the articles: That may mean three things:
  1. Polyanna explanation: The readers love my columns so much that they think no comment is necessary.
  2. Neutral explanation: Economics columns, by their technical nature alone, bring in less comments.
  3. Readers are just attracted to my cheesy titles; no one reads me.
I know that 1 is not true. It is also true that I manage to come up with eye-catching titles, but I do hope it is 2 rather than 3. Anyway, there are two ways to find out:

First, I could look at other Econ. columnists writing at the Daily News (looking at other papers complicates the picture a lot, as they have different internet viewer types and characteristics). The closest to my style at HDN&ER is Erdogan Alkin, and glancing through his columns, I see that he more or less gets the same number of comments as me. So maybe, it is an economist thing after all... 

Or maybe, I should just come up with a boring title next time around and see what happens. Actually, I did that a couple of weeks ago, although unintentionally- I could not find a cheesy title for my column about the impact of Basel III on Turkey, so I just called it Basel III and Turkey. That column has got about 30% more hits than the following two weeks' articles, although the topic itself was arguably rather eye-catching then.

I don't think there is a simple way to resolve my curiosity. But I was feeling a little bit chatty- at least, I've got that out of my system:)...

Weekly Hurriyet Column: Economist Wars: The Ratings Wars

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. 

For a change, I have no addendum this time around, except that I really love my cheesy title.

Anyway, on to the column:

As the wise Yoda would say, begun again the ratings war has.

The Financial Times, or FT, beyondbrics blog featured several guest posts on the curious case of Turkish sovereign ratings last week. I say curious because according to one camp of economists, Turkey’s sovereign ratings are way too low, and the country deserves an upgrade to investment grade.

There are different strands of this argument. As Credit Agricole Cheuvreux’s Simon Quijano-Evans argues in the first of the FT series, one is to note that markets, as evidenced by the low spreads of Turkish credit default swaps, or CDSs, have already priced in an upgrade.

It is true that Turkey’s sovereign ratings look unjustifiably low compared to its CDS spreads. But the CDS market, despite its sheer size, is rather illiquid, according to data from Depository Trust and Clearing Corporation, a clearing house for over-the-counter derivatives.

Even if you adjust for liquidity, you have to remember that CDS spreads also depend on global factors. A simple statistical exercise reveals that U.S. interest rates and global risk appetite weigh much more on Turkish CDSs than domestic developments. In fact, sovereign CDSs tend to move together a lot, although country-specific factors do affect long-run trends and structural breaks.

But irrespective of the CDS argument, Turkey’s economic fundamentals seem to speak for themselves. Many analysts who argue for an upgrade point at the country’s sound banking system, low debt ratio, high growth rate and even status as a regional power.

Not so fast, Murat Üçer of Global Source Partners and Turkey Data Monitor warns in a follow-up post. He notes the country’s vulnerabilities such as the challenging balance of payments and inflation outlooks, unbalanced fiscal-monetary policy mix as well as structural and institutional weaknesses.

There is no way to resolve the fundamentals debate. As I argued when the first ratings war broke out more than a year ago, for every indicator that shows Turkey is underrated, you can find another that illustrates it is overrated.

A useful simplification would be to note the dichotomy in Turkish data between “stocks” and “flows”. Stocks look good, whether it be bank capital or debt-to-GDP ratios. But the flows story of the need to ensure high-quality capital flows to sustain growth looks shakier by the day.

There is also a much subtler argument: Analysts like Royal Bank of Scotland’s Tim Ash agree that Turkey’s economic indicators paint a mixed picture, but also argue that they are nevertheless better than some peers with higher ratings. At his FT guest post, Tim looks at the likes of Egypt, Hungary, Latvia and Poland to prove that Turkey is underrated relative to peers.

To me, that reflects the peers’ mess-up (and the agencies’ sluggish response) more than anything else. But it also presents an enormous window of opportunity, as Murat underlined in a phone chat. According to him, Turkey could easily move to investment grade and beyond if it capitalized on this opportunity by focusing on the much-needed reform agenda.

Tim also argues that sovereign ratings should gauge where a country stands relative to others as well as default probabilities and willingness to pay, but not necessarily economic strength. He is right if you look at how the agencies define ratings. But in practice, the agencies would have to change their whole methodology, as Murat notes. I would not count on them too much, as these were the guys who naively bought into the IMF Stand-by and fiscal rule fairytales, not to mention their role in the global crisis. 

That’s why I think that this should not be a war among economists, but by them, against the rating agencies.

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