Thursday, January 27, 2011

Addendum to Hurriyet column, Talking Turkey on the crisis

As I mentioned when I posted the column to the blog, I have several additional points to make, so here we go:

First and foremost, Ferhan's presentation, which summarizes the paper I discussed in the column, has been put up to the ERF website. It is a really well-prepared presentation, so if you don't feel like reading 100 pages, definitely go over it.

Second, I exchanged several emails with ERF director Sumru Altug after the conference. It seems that there is no big difference between her "expectations" explanation and my "once bitten twice shy" or "crisis savvy" explanations. In fact, you might see my explanations as a subset of hers, as they could explain the sudden drop in expectations. Other than that, I feel Turkey was a bit more externally vulnerable at the time than she maintains, but that's about it. We both (and the IMF as well, I believe, although I don't think they say it explicitly) believe that the Turkish response was late and muted.

By the way, I don't really try to get to the bottom of this in the sense that I offer two competing explanations: It could be that consumers and businesses are extremely risk-averse when it comes to crises, or that they just know how to deal with crises. This is similar to Sumru Altug's point that agents could be adjusting their expectations rationally (crisis savvy) or irrationally (once bitten twice shy)- actually if you take the standard definition of rationality, once bitten twice shy guys could be rational as well...

Third, it has been brought to my attention that the IMF, in its latest Article IV published back in September, attributes the sharp output drop during the crisis to Turkey’s history of crises, which has made clamping down on spending an automatic response. This is more or less my point. They make this point in particular by looking at the historical volatility of Turkey’s GDP compared to Brazil's. I have no idea how I missed this, as I had read the Article IV, and not as Wood Allen had read War and Peace:)...

But I was nevertheless very pleased to learn that, as the Fund has probably used 90% analysis, 10% judgment to reach that conclusion, in contrast to my 90% judgment 10% analysis (but give me a break, I had half a day to read a 100-page paper and write the column, so I didn't really have all the time in the world). Anyway, if you are interested, here's the link for the report.

Last but not the least, I am totally convinced that despite all its apparent benefits, PowerPoint has profoundly changed the way we listen to speeches: Caner Bakir of Koc University commented on Lorenzo's presentation with a traditional old-school speech, i.e. without a PPT presentation. He made really interesting observations, most of which I only half understood, as I was having problems concentrating to his speech without a PPT presentation to look at! Call it what you like, but now I am sure that PPT has bastardized our conference-listening skills:)...

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