Sorry for the Turkish, but it does not really translate well into English- it literally means "what an unclosable output gap", and I am saying it in reaction to today's release of December Industrial Production and the CBT's argument that the output gap still has a long way to go:
If you are interested in reading more, have a look at this Citi note. Incidentally, they make the same points about fiscal policy I made in yesterday's column, in case you are thinking I am the lone ranger...
Posts
4 comments:
UKALA!
Hmmm, if this is not "the perennial spammer", my fan base seems to be growing:) But I am not sure why it is me who ends up as "ukala", although a many other Turkey economists are saying exactly the same thing...
I disagree with any of the "rapidly closing output gap" or "overheating economy" arguments. Industrial production constitutes only 30% of the total economy and the correlation does not necessarily imply causality as you know it better than I am. The diffusion effect of industrial sector dynamics to services sector may take more time than you expect. Moreover, backward linkages may not be strong as much as you think. In order to comment on a gap, one has to specify a correct reference point, which is the "potential output" in this case. Given the developments in Turkish economy over the last decade, I think CBT's "negative output gap" argument might have a more profound significance. Let me put it this way: Turkish economy would have grown by 60% since 2003, if the real GDP had increased by 6% each year. However, by the end of 2010, Turkish economy is estimated to have grown by 45% since 2003. I believe this could be one reason that why Turkish economy might still has a negative output gap.
@ Anonymous: Thanks for the excellent commentary. I am really busy at the moment, but will address your concerns shortly...
Post a Comment