Friday, April 29, 2011

Live-semi-live blogging and/or a future column

I am at the Sabanci Center in Istanbul (home of Akbank), waiting for the Istanbul as Financial Center conference.

Other than being pissed at denied entry to the world's (probably, unless there is one in Langley) only limited-access Starbucks, I am in quite good spirits, as I will be hearing about a topic that first came about at IMF-World Bank meetings in Istanbul in one and a half years ago. I had written a joint column on the subject at the time, so I will be looking forward to seeing (or rather listening) for myself whether things have changed since then. 

I am not sure if I will do a live or semi-live (i.e. in the lunch break, or right after the break) post, but I will be listening carefully and taking notes, as this is a great opportunity for a follow-up column- in fact, I should append my writing schedule for the next few weeks...

Thursday, April 28, 2011

Roubini Post, Turkey: These Economists Are Crazy!

This post already appeared in 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...

I don't have much to add, just a few small points, which I will be sharing in the next 24 hours or so...

Wednesday, April 27, 2011

In store for the next few weeks

I will be traveling to Jordan for a consulting gig in the first two weeks of May. Since I will be quite busy there and will be concentrating on an economy other than Turkey for a change, I am planning ahead my columns for the next three weeks. 

For next week, I plan to do a comparison of the three main parties' (AKP, CHP, MHP) economic programs- I could call it Econ Wars, The Revenge of the Gandhiji:).... I plan to devote the following week to the IMF paper I discussed last Friday. This will take me to the end of my two weeks Jordan: I would like to do at least one column on the Jordanian economy, but I would need to somehow relate it to Turkey. One obvious direction would be Jordan-Turkey trade relations.

As if this were not enough, I also need to write an editorial for South Monday. Since I don't have a brilliant idea, I'll probably just write about the latest tourism statistics...

Since none of these depends on the latest data, I could do these right away. In fact, I am planning to do the Gandhiji and IMF pieces tonight. Let's see how it goes!...

Tuesday, April 26, 2011

Another decent performance

With not sufficient power in my Bberry to run the radio, I was completely bored at the Adana airport, waiting for my flight in a terminal with a density of at least 3 people per square meter, so I just wanted to see how popular my column was, using the screen grabber application:
Not as popular as last week, but still a bronze medal. Can't complain!:)

BTW, it is amazing how Adanites (Adana natives) defend their crappy airport: According to them, if it were bigger, it would not be so central and the security checks would not be so light. Go figure:).... But there are indeed great kebap places only 3 minutes from the airport, so I can sympathize with them:)...

Monday, April 25, 2011

My favorite Turkey graphs

I was having lunch on Friday with a group on non-Turkish economists interested in the Turkish economy. Based on their questions, I have chosen my favorite graphs of the Turkish economy.

I. Seeing the Central Bank's policies in action (all about interest rates):
The Central Bank borrowing and lending rates are natural bands for the overnight rate. If the Central Bank does not provide enough liquidity, the overnight rate will continuously hover above the policy rate, which kind of beats the goal of a volatile overnight to deter hot money.

If you want more on the Central Bank's policy dilemma, you can have a look at my post from last month, which has two complimentary graphs.

II. FX deposits and the exchange rate: Anyone who studies the Turkish economy sooner or later hears that FX deposits of residents act as a buffer against lira depreciation. Here's the appropriate graph:
There is a relationship, but it is not as strong as some people believe it to be. At the end of the day, it all depends on expectations, as well as the level at which locals bought their beloved foreign currencies. It is quite possible that if they expect more FX appreciation, they may want to hold on rather than engage in profit-taking.

My-CHP hype cools down...

.... after Kemal Kilicdaroglu started with the populist promises such as giving SMEs interest-free loans and he like. 

So although I am not as hyped-up with the CHP's economic agenda as before, I still like their program.

In any case, I plan to devote next week to a comparison of the three main parties' economic manifestos. I could maybe call the column The War of the Economic Manifestos:)...

Weekly Hurriyet Column: These economists are crazy!

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website.  As for the title, yet another cheesy title, which I explain in the first sentence of the article (and the first "picture")

As for the addendum, I don't have anything urgent to add for a change, so I will be waiting for the reader comments to post my addendum- so that I can integrate them into the addendum as well.

Anyway, on to the column:

That’s what Obelix would have said if he were living in our times, and I would have had to agree.
I know that, with this provocative phrase, I sound like the Cretan philosopher who said all Cretans were liars. After all, if I am, as an economist, crazy as well, there would be no reason for you to take my bold claim at face value.

But it is not such a bold claim at all. Unlike Nassim Nicholas Taleb, the Black Swan guy, I hold no everlasting grudges against the economics profession or economists. If I were, I would have to be against myself, similar to the Beşiktaş support group Çarşı, who had to disband, after years of being against everything led to being against itself.

Such an existentialist approach, which would lead to self-denial, is just not my cup of tea. However, I am totally perplexed by the declaration of almost all the market economists covering Turkey that the first quarter budget figures are positive and that the government is running a tight fiscal ship.

It is true that the raw numbers look impressive. The central government budget deficit turned out to be 4.1 billion liras in the first quarter, quite an improvement over the deficit of 11.3 billion liras in the same period last year. You can see the same pattern in the primary balance, which excludes interest payments: A surplus of 9.8 billion liras compared to a more modest figure of 3.7 billion liras.

But once you start digging into the data, things don’t look as pretty: For one thing, the primary surplus, as defined by the Ministry of Finance, includes one-time revenues. To get a better idea of the budget, such non-recurring items should be excluded. The IMF-defined primary balance, which does exactly that, paints a much more sobering picture.
Besides, these central government figures exclude items like the spending spree by the Housing Development Administration of Turkey, or TOKİ. Neither is the arrears build-up of energy enterprises included in the bill, as this too is outside the realm of the central government budget.

Even if you decide to ignore these technicalities, the rise in expenditures is hard to overlook. Primary expenditures, which exclude interest payments, have been growing faster than GDP for a while.
Despite this robust expenditure growth, the headline budget numbers look healthy because of the strong increase in tax revenues. In fact, over the last few months, non-interest expenditures and tax revenues have risen more or less at the same rate, at around 15 percent. In other words, the Justice and Development Party government is spending more or less what it is collecting in taxes.
Due to the unnatural (at least by developed country standards) share of indirect taxes in total, tax revenues are extremely cyclical in Turkey. Once you adjust for this cyclicality, it turns out that the fiscal balance has been on the fall, and that fiscal policy is rather loose.
In any case, you should look at a country’s economic circumstances in judging its fiscal position. Given that the government is worried about the country’s growing current account deficit, it should adopt a tighter fiscal stance, one that will rein in domestic demand and support the Central Bank’s efforts to cool off the economy.

So you now know why I am perplexed by all this fiscal optimism. But I find comfort in the fact that there is at least one entity, other than my friends at Turkey Data Monitor, who share my concerns about the budget: The suspicious delay of the IMF's latest Turkey Staff Report suggests to me that we are not the only ones who are worried about the fiscal stance.

Anyone who knows me can testify that I am one crazy fellow, and my last name proves it as well. But the fiscal optimists are challenging me in the insanity department.

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

Friday's conference

Friday's conference did take place, although I was late for my own presentation: I left home (Cengelkoy) at 8.55, hoping to comfortably make it to the 10.30 presentation. It was 11.45 or so when I was entering the gates of Koc University in Sariyer: I was victim to the Friday morning accident at the entrance of the Fatih Sultan Mehmet Bridge. It is beyond me why an accident that took place at 6.30 am could not be cleared at 9.30, but as a result I spent three hours sitting behind the wheel, less than 12 hours after I had arrived from Marmaris. If I had been driving from Marmaris instead, I would have been at the outskirts of Manisa- made me really depressive when I noticed this:)...

But on the bright side, I now know, as I explained in the intro. to my discussion, all the summer concerts advertised on the billboards. So if you would like to know when Bon Jovi or Elton John is in town, I am your guy:)

As for the conference, I am eternally grateful to Sumru Oz for shifting the schedules so that I could do my discussion. She has also put all the presentations and discussions at the ERF web site. As for mine, you can have a look at it in PPT as well if the Pdf on their web site is not good enough- gotta love Dropbox!....

And I plan to cover the paper I wrote in my Hurriyet column in the next couple of weeks, although I am also considering to wait until the Staff Report is out- see my discussion for why and today's Daily News column for other possible goodies in the Staff Report.

Thursday, April 21, 2011

Why I am voting for the CHP

I am at the Dalaman Airport, waiting for my flight to Istanbul and reading the CHP's Economic Manifesto.

I am impressed! There are parts I don't like, and a few that need clarification, but it is overall way ahead of the AKP's economic agenda, not in terms of promises but solid economic analysis.

So the CHP has made me eat my words, i.e. the last sentence of my last Daily News column.

And loyal readers would know that I am no CHP fanatic; in fact, I am not a fan of anything except my beloved Besiktas. And as some readers will remember, I have been a staunch critic of some of their policies, leading one fanatic to insult me blatantly once.

But I have to render unto the CHP what is the CHP's and that's why I will be voting for them in June; if I didn't, I would not be able to call myself an economist. And I definitely need to do a column on their economic policies soon, although it may have to wait until the following week, as I already wrote next week's column...
Sent by BlackBerry Internet Service from Turkcell

Reminder: Launch of IMF reports at Koc University tomorrow (with paper links)

As I mentioned earlier, you have a chance to hear your friendly neighborhood economist live at the launch of two IMF reports at Koc University tomorrow in an event organized by the ERF.

As you can see at the hyperlink, I will be discussing the reserves adequacy paper. And if you are interested, there is also a technical supplement for the paper as well.

Sorry for the long title, but quite a few readers asked me for the link to the paper, and I wanted to make sure they know it is in this post. As for the other paper (capital flows), I don't have it in my harddrive, but it is publicly available (both papers were released a couple of weeks ago), so I am sure a google search will direct you towards it....

So much for Central Bank independence

Nope, I am not going start on the new Central Bank governor Erdem Basci's long-time (four decades or so) friendship with economy czar Babacan and jump to some kind of "ingenious" conclusion that CBT is no longer independent!

But a sentence from the AKP's brochure on their policies so far, which was published along with their election manifesto, speaks for itself: " We have reduced interest rates! We have decreased the Central Bank policy rate, which was 44 percent back in 2002, to 6.25 percent in 2011"...

This does not show CBT's independence (or lack of it), but it does show how the AKP top brass see the Central Bank!

And BTW, the policy rate in 2002 is not the same as the one in 2011, but I guess that is not as important as the general logic of the statement itself.

HT to Radikal columnist Ugur Gurses for mentioning this in his column from yesterday.

Wednesday, April 20, 2011

Roubini Post, Turkey: The economic consequences of Mr. Erdoğan

This post already appeared in 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...

I noticed, unfortunately after it had been published, that the column needed some clarifications/expansions, partly owing to my usual space constraints, and partly due to, I must admit, bad planning and prioritization on my part. Therefore, I posted an extensive addendum over at my blog right away...

Tuesday, April 19, 2011

Competition Indices

I just finished all the contracts for my moonlighting activities, and all the haggling has given me a complete new look into Industrial Organization, one that never crossed my path during my undergrad and grad studies of the subject.

Empirical IO has pretty standard measures for measuring the degree of competition in any industry. But once you dig into "the field", you see that simple measures are flawed.

For one thing, measures based on the number of competitors or profits do not work at the local level. For example, there are quite a few major wine producers in Turkey, but there are only several serving Marmaris, and out of those, only three selling bag-in-the-box wine.

To give another example, most small-scale services guys are working almost like monopolies, despite the huge number of suppliers. For example, I found out, when we were looking into to have a simple ladder for our new pier, that chrome craftsmen were charging twice the prices in Izmir. We ended up working with a guy from Izmir, who was in town for a big job at another hotel; he would have never come for our small job...

Nor is market share a perfect measure: Mey, recently acquired by Diageo, has around 90% of the hard drinks market, but the presence of even two very small producers guaranteed that their prices were competitive. 

Then, there are the micro concerns: It depends on how much a firm is battling its competitors, i.e. willing to forgo profits just to increase its portfolio. And timing is everything, at least in tourism: The suppliers have "budgets" early in the season, which they can use to offer better prices for hotels they really would like to add to their portfolio. As for the hotels, being big always helps, so a sector that looks monopolistic to a small apart hotel can seem perfect competition to a 2000-bed resort.

Here are my small notes from field work, with my subjective competitiveness grade (0 being no competition, 10 being perfect competition):

Coffee/Tea and Concentrated juices (9): 4 producers serving, one well-known brand unwilling to lower her prices,  but the other three behaving as if in perfect competition.
Raki/ hard drinks (7): Quite competitive, when you consider one producers has 90% of the market.
Beer (3): Two major brands, but entry of a third, low-cost producers increases competitiveness considerably. I would have given a "1" last year.
Coke (7): Only two major brands, a couple of local smaller guys, but still rather competitive.
Ice Cream (8): Only two producers, but really cutthroat (toward each other)
Wine (2): As I said above, only three guys that can make offers, but one can offer prices much lower the others, and since he knows it, he can easily dictate his still-quite-high price.

I have no idea if I will ever make use of this in a more concrete context, maybe a column or something else, but I can just leave them here for the time being...

Monday, April 18, 2011

Attention attention, ego getting inflated again:)

Another great performance from your friendly neighborhood economist, including one gold...
And one silver:
This is the second time I am making it to the coveted (or not so coveted) most popular spot. I had achieved that with my Wikileaks column as well, which had attracted even more comments...

In addition, I got at least a couple of dozen tweets- I am not sure because Daily News' counter seems to freeze after 15 tweets, a number I had reached early in the morning. Even more notable was how quick I entered the charts: I usually have to wait until the afternoon, when my American readers wake up, to make it to the top 10, but this time I was in the lists early in the morning, meaning that the column had got quite bit of interest from Turks, or at least residents of Turkey.

But there is no need to overreact; as I told reader Kursat, who was congratulating me on my column receiving growing attention: I am glad to have my columns read and make it into the Daily News Top 10. But at the end of the day, popularity isn't everything. I could come up with a controversial topic like today's and make it to the top three every week.... Anyway, next week I am thinking of writing about the mistaken idea that fiscal policy was tight in the first quarter of this year. I am sure that one will not be as well-read, even if I manage to come up with an eye-catching title...

An invitation to hear my ramblings live

You can see me live at the Koc University / ERF event on Friday.

As you can see, I will be the discussant of the first IMF paper. Both papers are quite interesting and caused quite a stir in the international media when they were released a couple of weeks ago. 

I will withhold writing about these papers for a while, at least until the Staff Report comes out, but I have quite interesting Turkey implications, at least for the reserves adequacy paper I am discussing. I know Koc University is way out, but I can assure you my comments alone would be worth the long drive....

I am not a heartless capitalist pig:)

Since I got the serious stuff out of the way, i.e. the column and the express-addendum, I can now do some humor before I officially close shop for the tonight.

An anonymous reader commented the following to my column on Turkish bond prospects:
Unemployment at 11 something percent and economists still fretting about inflation (currently below 4 percent). So, how do we get economists to worry about unemployment for once? What's that? Oh, I see, they never care about the people. They only care about the 'investors'. Gotcha. That must be the first thing they teach to econ students.
To clarify once and for all: I do not care much about investors. That's the main reason I never consider returning to the life of a market economist again. In fact, this is one of the few columns I write about "markets" every year...

Besides, I am fretting about inflation precisely because it will not stay at 4%:) But I also do care about employment, as you can see in my column back from 2009. In fact, as another anonymous reader responded:
It's all about priorities. Each one of the macroeconomic indicators is equally important. However, at the time being, inflation is the most critical factor and might have further distorting effects on employment unless properly managed.
I couldn't have said it better myself. Such comments make me take my columnist and blogging jobs seriously. After all, you get motivated when you notice your are being read by such folks...

Addendum to Hurriyet column: The economic consequences of Mr. Erdoğan

As I mentioned when I posted the column about an hour ago, I am quite unsatisfied on how this turned out. I noticed, after I submitted it of course, that not only I could not clarify some of my points, I also left out a couple of important points. So a quick addendum is in order...

Let me start with the clarifications:

I now notice that when I compare the AKP's policies in office with the MHP's manifesto, some might think I am comparing apples and oranges. After all, one is what is done, the other what is promised. And the AKP's manifesto had conveniently come out on Saturday, so I could easily have gone gone for a battle of the manifestos had I chosen to do so. However, this is not such a big mistake in the sense that I feel it is the opposition's duty to clearly spell out their policies.

Having said that, I should admit that I am kinda disappointed with the AKP's manifesto as well. I will not go into much detail, but while the AKP's 2 trillion-dollar economy goal (by 2023) is realistic, the 5% unemployment target is nearly impossible in the current setting. You'd need serious structural reforms, starting with the education system, to get the NAIRU down to 5%. Incidentally, PM Edogan did mention education reforms during his declaration of his party's manifesto, but he needs to clarify that.

But I must also say that the AKP's manifesto is still a couple of shirts above the MHP's, as Turks would say. To give an example, I was impressed by PM Erdogan's mention of making child care affordable, as your friendly neighborhood economist had called for in celebration of International Women's Day. Equally remarkable is his promise that pre-school education would be mandatory. Incidentally (or maybe not so incidentally), both these policies are recommendations of recent World Bank papers, so the kudos to the Bank for making itself heard and to the PM for hearing them...

I think reader Kursat says the final word on policies and manifestos with a quick comment to the column:
Apparently CHP still doesn’t consider politics as a science, yet median voter decides without reading party agendas, they don’t provide any suggestions on economy. As an economist, would you still vote for CHP knowing the fact that their macroeconomic projections are still groundless and currently worse than AKP’s?
At the end of the day, everyone cares about the money in their pocket however when it comes to the day of voting, our political values overrides capitalism.
Here's my quick answer to him, again in the blog:
Well, the answer to your question is in the last sentence of my column, but to be clear: I would not be able to call myself an economist if I voted for MHP after having read their meaningless manifesto. The CHP's is coming out on the 22nd, I think, so I will answer your question then, but honestly, I don't have much hope...
BTW, if you are a CHP fanatic, please note, before sending me a hate mail, that I did not say anything- it is my reader Kursat:) And if you are asking for his identity and whereabouts, I will have to refer you to Marky Mark's great scene (00.35-00.45) from The Departed... I guess you are not the only ones who can swear:)....

Turning to a completely different direction, I would have loved to link the strong consumption boom during the AKP years to Turkey's current account deficit problem. After all, as I explained while writing about Turkey's savings gap, such untamed growth is not without problems. For one thing, the recent decline in the savings rate is partly the result of this consumption boom I mention in the column. Similarly, economists Murat Üçer and Caroline Van Rijckeghem show that as Turkey’s low savings rate is largely explained by the post-crisis credit growth and housing price increases. But I don’t think even economists would be worried about Turkey’s savings gap while the living standards are improving.

With another sharp turn, a couple of words on the IMF comedy are in order: In retrospect, I am sure some readers will tell me that the government did the right thing by not going for the SBA; after all, Turkey did not have serious problems in financing the current account deficit. I should then remind you the story of smart-ass Japanese housewife Tasimasu, who refused to buy earthquake insurance for 20 years. She would always show off to her friends on how much money she had saved in the last two decades by foregoing that. She will be homeless in the foreseeable future!

I am kind of done with the clarifications, so now on to the missing:

I am ashamed to say that I forgot to put in arguably the AKP's biggest policy crack: Their inaction both during the crisis and the strong recovery aftermath. If you want proof, look no further than the numbers. If the government was fine-tuning the economy at all, would we have contracted so much in 2009, and then grown so much in 2010:
Yes, a picture is worth more than a thousand words, but I elaborate on this argument in the addendum to my recent column on the growth figures...

I could have also mentioned the AKP's fiscal policy, which is remarkably loose, despite what almost all economists claim, with the notable exceptions of your friendly neighborhood economist and the Global Source team. This could have gone under the spin-doctoring theme as well, as I am impressed by how the AKP is able to package this fairly loose policy s tight, not only to the layman, but also to all those economists of those fancy banks (yes, I am jealous of their six-figure salaries). Luckily for me (and Global Source), the delay of the IMF's latest Turkey Staff Report tells me we are not the only ones who are worried about the fiscal stance:) Hmmm, maybe this should be next week's column....

That's it, sorry it was a bit longer than usual, and thanks if you stuck with me this far:)...

Weekly Hurriyet Column: The economic consequences of Mr. Erdoğan

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website.  As for the title, no cheesy movie titles for a page: I am paying homage to the great master.

I am now noticing that the column needs some serious clarifications/expansion, partly owing to my usual space constraints, and partly due to, I must admit, bad planning and prioritization on my part. Therefore, I will need to post an addendum in the next hour or so, so that I can link to it in a comment to the column.

Anyway, on to the column:

With less than two months to go before the elections, it is appropriate to review the ruling Justice and Development Party’s, or AKP’s, economic policies, with a special emphasis on their second term in office.

When the AKP came to power in 2002, Turkey was in the process of implementing an economic recovery program, put in place after the 2001 crisis. There were valid concerns that the rookie government would be unable or unwilling to continue with these policies.

AKP proved the doubters wrong big time. Commendable execution of this well-planned program towards economic stability, with an expansionary fiscal contraction and banking reforms as its pillars, coupled with very favorable global conditions, did wonders for the economy in the AKP’s first term in office.

While it is difficult to prove empirically, that macroeconomic performance was the driving force behind the party’s stellar performance at the 2007 elections. In fact, Yapı Kredi Bank economists have shown that the middle classes have been increasing their share of consumption in the past few years. A short drive through the newly-booming districts of İstanbul such as Ümraniye and Güngören, which have developed into buzzing consumption centers, would confirm their findings.

The hope was that, with the macroeconomy more or less in order, the new AKP government would concentrate on the micro reform agenda after their resounding victory in the 2007 elections.

That was not the case. Not much has been done to improve the investment climate in the last four years. As the economy czar Ali Babacan candidly admitted during the IMF-World Bank meetings in Istanbul in 2009, the government could not use the global crisis to jumpstart the reform agenda, as some countries have done.

Instead of reform, we have been spoon-fed first-rate spin-doctoring. First, the government dragged its feet on the IMF Stand-by Arrangement, or SBA, for months, whereby hearsay that the SBA was about to be finalized would conveniently resurface every time Turkish assets tumbled. Then, the government’s new opiate for the masses became the fiscal rule, which was announced to great fanfare, only to be postponed several times before finally being brushed under the carpet.

Part of the problem seems to be Prime Minister Recep Tayyip Erdoğan, who has said several times that he has “the last say in economy matters.” I have been told that the Treasury and the IMF were steps away from an SBA, and that Babacan was very enthusiastic towards the fiscal rule even a couple of weeks before Erdoğan shelved it for good.

It seems that the PM’s authoritarian style spills over to economic policymaking as well. Besides, he has an interesting view of economics, underscored by his recent remarks that “low interest rates beget low inflation,” rather than the other way around, as the economics profession mistakenly believes.

AKP’s policymaking is showing cracks, but the opposition has failed to produce anything better so far despite promising early efforts such as the family insurance scheme by the main opposition Republican People’s Party, or CHP. We have yet to see their election manifesto.

The Nationalist Movement Party’s economy agenda, on the other hand, is vague. Parts of it look like a carbon copy of the one from the 2007 elections. Their macroeconomic projections are baseless, and they offer no clue how they will reach their goals. I am also not particularly impressed by promises such as making the Turkish army the third strongest in the world and keeping the Central Bank in Ankara.

At the end of the day, unless the CHP pleasantly surprises us in the next few days, I won’t blame you if you decide that a few cracks are better than a gorge.

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

Friday, April 15, 2011

Please like me:)

As I have pre-announced a couple of times, I will be migrating this blog to Nouriel Roubini's new blog aggregation site soon. I cannot make the official announcement for a couple of weeks or so, as the new page will not be available until the end of the month, but I need to ask a favor in the meantime:

The able folks who work with Roubini have incorporated on the profile page of my new blog Facebook and Twitter widgets, which will allow me to have my latest Facebook posts and Tweets all in one spot on my profile page. So far so good. However, Facebook only allows this if I have a “Fanpage” as opposed to a personal page (otherwise it would be opening a private Facebook page to the public, which it doesn’t allow). 

Therefore, I set up a Fanpage to make use of this nice and convenient feature. Again, so far so good. But I need to get a certain number of likes to be able get a regular Fanpage with my name rather than one with the weird numbers at the end. I know this from doing the same thing with our hotel's Fanpage. So I would really appreciate if you take a few seconds to click here to get to my Fanpage and like "me". I scattered the hyperlinks to the Fanpage all through this post, other than this last sentence, but if those hyperlinks do not work for you, here's the direct link:

Thanks in advance for this....

I don't want to brag...

... as I am often accused of having an inflated ego and all that, and you didn't need little birds similar to Emin Colasan's to figure this one out, as it was quite obvious. But since Erdem Basci has officially been appointed as the Governor of the Central Bank of Turkey, I can now say, "Always remember, folks. You heard it first from Emre".... 

BTW, my oxymorononic socialist-f3n3v fan friend Sinan had the best response to that column: "Los Ergenecon". Happily, nothing of that sort happened, either with that or with the much more dangerous South Weekly editorial.  I guess being being an insignificant columnist writing for a tiny and obscure newspaper that no one cares about does have certain advantages...

Thursday, April 14, 2011

Roubini Post, Turkey: I Expect You to Die, Mr. Bond

This post already appeared in 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...

Please note that I have two addenda over at my blog: One where I sketch my empirical methodology and another one with general comments.

Wednesday, April 13, 2011

Addendum to Hurriyet column: I expect you to die, Mr. Bond

As you know, I had already posted an addendum to this week's column even before the column was published, one which solely focused on my empirical methodology. So a more general addendum is in order:

On food inflation, I devoted an entire column to food inflation, inspired my haggling with the grocer during my moonlighting activities, in November. You can see my methodology in the blog version of the column. As for the volatility of food inflation, you can see it in a previous post as well.

As for supply and demand dynamics, one factor to consider is foreigners' demand for Turkish bonds. As flows to EMs have picked up of late, a historical summary is in order:
So there seems to be some room for bonds, if history is any guide at least. In fact,  as J.P. Morgan reports, latest figures from the CBT's weekly press bulletin point to very strong flows.

As for domestic demand, as mentioned in the column, the reserve requirement ratio hikes mean that banks will not have much appetite for bonds in their investment portfolios, as they will try to get the balance sheet growth from credits. BTW, this substitution effect is another reason why it is not simply RRR up, credit down, as the CBT claims. Similarly, Turkish funds will not buy a lot government bonds, as bank bonds are much more attractive nowadays. We could see some interest from Turkish retail investors, as their bond holdings are tiny for the moment.

Finally, as  a couple of recent articles show, the points I make about Turkey are also true for many emerging markets. For example, other EMs are signaling inflation scares, and just like Turkey, rate hikes have only been partially priced so far...

BTW, not all Turkish bonds are created equally: I am more optimistic on longer-term and variable-rate bonds. My optimism is also supported by the recent flattening of the yield curve. These could also be alternatives to deposits further down the road...

Tuesday, April 12, 2011

I seem to have settled down...

... at the number 7-9 spot in Hurriyet Daily News & Economic Review's top 10 list with my weekly column, and yesterday's was no exception:
This seems to be a good equilibrium for me: In the top 10, but not high enough to make my ego "too inflated"...

BTW, the picture above is from my Blacberry's screen; I just wanted to try out my new screen grabber application, and I think it is OK, I guess...

Monday, April 11, 2011

Weekly Hurriyet Column: I expect you to die, Mr. Bond

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website.  As for the title, no explanation needed this time around:)

I posted an addendum on Sunday, where I sketched my inflation forecasting methodology. And there will be additional addendum soon. So on to the column:
That’s what the villain Goldfinger answers 007 when the latter asks, “Do you expect me to talk?” in the Bond movie Goldfinger.

I remembered this famous scene when Turkish bonds rallied strongly after the favorable March inflation release on Monday. My precautionary stance towards bonds stems mainly from my belief that markets seem to have been fooled by the inflation figure, whereas supply and demand dynamics paint a mixed picture for bond prospects.

While inflation fell below 4 percent for the first time in four decades in March, the inflationary outlook is anything but comforting.

For one thing, the March reading is largely due to the unusually low food inflation. But the volatility of both global and domestic food prices have increased substantially, which means that upward surprises are equally likely in the coming months. Besides, if the past is any guide, Citi Turkey economists show, in a recent report, that unusually low food prints are reversed in the following five months.

Oil prices are another risk to inflation. Moreover, with demand going strong, producers are likely to be able to pass on the increase in producer prices to consumers. Therefore, the growing wedge between producer and headline inflation is likely to close in the direction of the headline figure.

Besides, as the same Citi report illustrates, we have always seen inflation accelerate after elections, as much-needed administrative price hikes are frozen until then. With rumors that electricity price increases are on the way, I don’t see any reason to believe this time would be any different.

I have quantified these arguments into a time series model, the details of which can be seen at my blog, as even the mention of acronyms such as VAR and VECM are bound to scare my few readers away. At the end of the day, I am left with an end-year inflation forecast of 7.5 to 8 percent.

Once you accept this inflationary outlook and 2 percent as the real interest rate, two-year benchmark bonds look, if anything, overvalued. If you work with the inflationary expectations two years ahead instead, the benchmark seems fairly valued.

Supply and demand dynamics

On the domestic demand side, banks could be hit with new reserve requirement ratio hikes, which would curb their appetite for bonds. Besides, the limited appreciation potential for the lira constrains domestic demand for bonds as well.

As for foreigners, despite the fault lines of the Turkish economy I have discussed many times, such as the current account deficit and the unsustainable growth path, investors have an extremely positive perception of the political and economic outlook.

Besides, while domestics look more to the level of the lira in whether to invest in bonds, foreigners care more about its volatility. As I expect a more stable lira before the elections, the second quarter could mark the return of the carry-trade to Turkey. Bonds would be the main beneficiaries of such flows, as the Central Bank-induced volatility has made short-term assets risky.

On the supply side, the debt stock is likely to fall to 43 percent of GDP by year-end, and the redemption schedule is rather light, with the exception of May, August and November. The positive public debt outlook and financing schedule are bond-positive, and along with a surge in foreign demand, could lead the benchmark towards 8 percent. But I would expect such rallies to be transitory, as rate hikes after the elections have only partially been priced.

At the end of the day, while I do expect them to die sooner or later, there is still hope for Turkish government bonds, at least in the short-term. After all, they, like 007, just refuse to be a good boy and die.

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

Sunday, April 10, 2011

Addendum to tomorrow's Hurriyet column

As I explain in the previous post, I needed to post this addendum before the column is published, so here it goes.

First, on my methodology: I use a VECM with seasonally-adjusted inflation, FAO's (not the toy retailer) food price index, oil rices (Brent) and exchange rate. I then extend the framework with very simple demand measures such as output gap as derived from Industrial Production or Capacity Utilization Rate- since these are very rough proxies, and calculating the output gap is tricky, I wanted to do this separately.

Anyway, I found that a 10 percent increase in the FAO index and oil prices increase inflation 0.50 and 0.20 percent respectively. Almost all the full impact of both is registered in full in six months. 

I did not find any meaningful relationship with the output gap, but that's because of different assumptions were all giving different results, so I did not end up with much to report.

Citi Turkey economists, in their research note I quote a couple of times in the column, find slightly smaller numbers for food and oil prices, and their impulse response seems to yield slightly different results than mine. And they note the following with respect to the output gap:
Our results suggest that if the output gap remains at around 4%, this would raise core inflation by 0.9 percentage points in the rest of 2011. Without accounting for the spillover effects from core to other components of the CPI basket, this would in turn increase headline inflation by around 0.5 percentage points.
I have a couple of other points as well, but I'd better write them out after the column is published...

BTW, I found this ultra-cheesy title, so have a look at it for its sake, if for nothing else:)

Writing Schedule for the next few weeks

Since I am done with this week's column, I can start thinking about next week's, or even the next few weeks.

I have long been thinking about doing a sort of election guide in terms of Economics. What I mean is: I would like to evaluate AKP's policies in the last decade, or at least after the 2007 general elections, as well as summarize my thoughts on the main opposition CHP's economics agenda. I guess the insults of last time were not enough so that I am looking to get some more:)...

If nothing urgent comes up, I would like to start with the AKP next week, in an aptly-titled column, The Economic Consequences of Mr. Erdogan, paying homage to the great master in the process. I could then do my take on CHP's economics policies the following week, but I just learned that Koc University's ERF is organizing two IMF presentations in Istanbul, one on capital flows and the other on reserve adequacy. The Fund has been undertaking some work on these issues, which have been summarized by recent IMF survey articles, so I guess that's what the presentations will be about. Anyway, I could postpone the CHP article for a couple of weeks to cover the IMF stuff.

But this is just the tentative plan, so any suggestions / recommendations would be very welcome...

Saturday, April 9, 2011

Monday's column

I just finished Monday's column. I decided to write on my outlook for government bonds. 

The motivation for the column is the recent benchmark rally after March inflation came in much lower than expected:
As you can see above, the benchmark yield has been on an upward trend since the beginning of the year despite a couple of short rallies. So the question is whether this week's rally is transitory like past ones, or whether it could lead to more downward movement of the benchmark.

I explain my outlook for the benchmark in two sections: My inflation outlook and supply & demand dynamics. I don't want to give away too much, but the former is rather bond-unfriendly, whereas the latter paints a mixed picture for bonds at best.

I will have a more detailed addendum tomorrow. Yes, another addendum before the actual column, but I refer the readers to the blog for the details of my empirical analysis (I needed to do that, as I was critical of those giving out forecasts without revealing their methodology), so I need to get all that down (and hyperlink it) before the column is published.

And of course, you'll be able to read the whole thing in just over 24 hours (my columns are published on the web at 23.55 on Sunday)...

Wednesday, April 6, 2011

Roubini Post: A Turkey’s Growing Pains

This post already appeared in 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...

As usual, there is a short addendum, which I posted at the blog yesterday...

Another broken relationship

You could see this as another addendum to my latest Hurriyet Daily News / Roubini Global Economics column:

One of the most remarkable figures of last Thursday's Q4 National Income Accounts was the huge surge in investment, which points to yet another broken relationship:
As you can see, CUR was a pretty good predictor for investment until late. Honestly, I have no f--king clue what is going on here, i.e. why firms are investing like mad... But this means more spare capacity in the future, and so is inflation-positive (for the Central Bank)...

A few observations on inflation

I won't bore you with the usual details of Monday's inflation figures; you can read them in any analyst report. But here are four interesting observations on Monday's release:

First is the growing wedge between CPI and PPI  inflation:
As you can see, the two series were moving in tandem until of late.

Second, the link between oil prices and PPI has broken of late as well:
Third, exchange rate pass-through has been significantly lower than usual:
I would naturally expect the pass-through to be lower when there is excess capacity in the economy, but I just can't figure out how this is the case with signs of overheating sprouting like mushrooms...

And last but definitely not the least,  one of zillions of items the CBT collects prices on is bank fees, and that increased by 9% (over the month) in March. In case you were wondering how the banks were responding to the CBT's reserve requirement ratio hikes....

Addendum to Hurriyet column: A Turkey’s growing pains

I would like to add a couple of points to this week's Hurriyet column:

First, as I explained in the answer to the comments to the column, the growth numbers hint that the government did not take much action against the crisis. Otherwise, the economy would not have contracted in 2009 and then grown by so much. Such large swings are not healthy and indicative of policy inaction. 

Second, to explain a reader's remarks that the government would have a better picture of the economy than quintessentially pessimistic economists: It is not only the economists: The government and the CBT accept the economy is overheated as well; that's why Econ. tzar Babacan and the CBT are so "fixated" on credit of late. I am arguing they took action too little and too late, Just as the policy response to the crisis back in 2009 was too little and too late as well. A recent column in Radikal makes the same point (in Turkish).

As further proof on whether the government is managing the economy well: The government was expecting a much lower growth rate as late as September. That is another "soft proof" that the government lost the reins with growth...

Tuesday, April 5, 2011

Another decent performance

I again managed to squeeze myself into the top 10 with yesterday's column:
For some reason, I cannot see the picture as I write these lines. I am not sure if this has something to do with the Blogspot ban, but if you can't see it either, it just shows my column in the number 8 spot (please, no 8tas jokes) in the Hurriyet Daily News & Economic Review's most popular list on Monday.
I also have several comments, as well as two likes, so my thanks to the readers for "commenting" or "liking me"....

Monday, April 4, 2011

Weekly Hurriyet Column: A Turkey’s growing pains

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website.  As for the title, I know it is a bit derogatory, but being a Turk, I am entitled to Turkish jokes, just as Jewish dentists are entitled to Jewish and/or dentist jokes. "Growing Pains" loosely refers to the 80s show of the same name. Yep, I witnessed the 80s, but I was only a kid then:)

As always, there will be an addendum. Reader "babadog" makes quite interesting remarks as a comment to the column. I will expand on my points to him as well as note a couple of interesting facts about the growth statistics. Anyway, without further chit chat, on to the column:

Data released on the last day of March do a pretty good job of taking a snapshot of the Turkish economy.

First, the economy grew 9.2 percent yearly in the last quarter of 2010, bringing growth for the whole year to 8.9 percent. While this number seems rather impressive at first look, you must remember that what goes down must come up: Just as last year’s figure puts Turkey at the top of the growth league, the 2009 contraction of 4.8 percent was one of the highest among the country’s peers.

In fact, average growth during the last three years is a mere 1.6 percent. While this number might be rather satisfactory for the mature economies of developed countries, it is far from enough for Turkey. For one thing, it is definitely not sufficient for creating enough jobs to keep unemployment at bay.

Coming back to Thursday’s release, even a casual look is more than enough to illustrate the unbalanced growth profile: Domestic demand contributed 15.4 percent to growth, while foreign demand, because of imports growing much faster than exports, stole 5.6 percent from it, with stock depletion cropping a further 0.6 percent.
This is Turkey’s familiar disease of depending too much on external financing for growth, a direct result of its low domestic savings rate. In fact, growth breakdown is very similar to the previous quarter’s, except that the scale is now much larger.

Such unbalanced growth is cause for concern because it is unsustainable: If capital flows were to dry up, we could see a sharp adjustment either through quantities or prices. In other words, either the economy would contract, or the exchange rate would depreciate sharply.

Latest data suggest that the portrait is getting bleaker. The trade deficit continued its record run when the February figures were released on Thursday as well. While exports grew 22 percent yearly, import growth was a whopping 48.7 percent, and the wedge between export and import growth rates continued to widen.

It remains to be seen whether the Central Bank of Turkey’s latest measures have been successful at all in slowing loan growth and therefore curbing imports and the trade deficit. Governor Durmuş Yılmaz had noted in his ill-famed The Wall Street Journal speech that economists would need to wait until at least the end of March to judge whether the Bank’s policies were working.

In that sense, I am really looking forward to next week, as not only will complete loan data from end-March be available, but import taxes, which are used to project imports, will be released along with the March budget figures as well. I am more than happy to give Yılmaz the benefit of the doubt until then.

Speaking of the Central Bank, the growth and trade deficit prints also show how much behind the curve the Bank has been. No one would have blamed the CBT if the sharp reserve requirement ratio, or RRR, hikes of last month had been done in December.

Instead, the Bank opted for its unconventional policy mix of lowering the policy rate and increasing RRRs, which was, although the Bank claimed otherwise, net-expansionary. The Central Bank lowered the policy rate for the noble cause of deterring hot money, where it has largely succeeded.

But in retrospect, after having seen the growth figures, cutting rates in December looks more like adding fuel to the fire. As for the Bank’s quantitative tightening measures, with the trade deficit and other recent demand indicators hinting that growth has hardly lost steam, one cannot help but ask if the Bank acted first too little, then too late.

Let’s hope that the Central Bank’s policies will work. Because if they will not, the government’s and the Bank’s hands will be virtually tied until the general elections.

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

Back yet again

My forced absence from blogging lasted less than a day. I just figured out that the censuring idiots have blocked all Blogspot addresses, but not Blogger itself:)...

This means that I can still post, by logging in from Blogger rather than from my blog, but I won't be able to see my posts...

Well, worse than nothing, so I'll start blogging in full steam right away; after all, as I explained yesterday, I have another long night ahead...

a sad situation

I am watching over a patient, so I have to pull an all-nighter, something which I haven't done for 15 years. Since the room is dark, I can't read the FT, Radikal or The Economist (or O'Neiil's Netherland), so I was thinking this would be a great time to work on the blog. There were several posts I have been planning for a long time, such as The End of Days with DIBS (Turkish government bonds), comparing oil and gold prices, adding a few things on the impact of the RRR hikes (as a follow-up to last week's Hurriyet / Roubini ) column, but when I tried to enter the blog, I met with the familiar "access to this site has been blocked by court order" sign.

Now this is weird because thanks to my brother, I had figured out two different ways to bypass the ban. The first method, which simply involved changing the DNS settings, did not work out after a few days, so I implemented a much more elaborate method. But as of tonight, that seems to be kaput as well, so I have no way of accessing my own blog other than by emailing to the bog directly, as I am doing now. All this is sad and absurd, as Elton John put it:

It's sad, so sad
It's a sad, sad situation
And it's getting more and more absurd

Speaking of courts, I learned today at the hospital that all the IP addresses (and the pages they are visiting) have to be logged. That's why I had to log in to the hospital's network with the patient's room and ID number. You probably haven't heard about this because as the law is not actively enforced, no one seems to implement it. That would change if the authorities decided to throw fines all around...Forgive me, but this country is turning more and more into Chinese Democracy (thanks Axl, for not only this title, but also for the great albums of my high school days) by the day. I am sorry for all the Blogger uses, but I am just counting down the days: Not only for the release of the Bberry Playbook but also the migration of my blog to Nouriel Roubini's new blog aggregation site (I will have the full details on that in a couple of weeks).

As for my blogging problems: My brother is a computer genius, so I am sure he will figure this one out. If not, I'll continue emailing to my blog like this.... BTW, this is the first time I am embedding hyperlinks to an email to the blog, so I have no idea if it will work or not. Apologies if it gets messed up; I just won't try it again:)....

Friday, April 1, 2011

Oil and Gas

Gas as the Yanks use the word, not natural gas:)

Anyway, I've got Turkish gas prices following an email to one of the Turkish economy / markets newsgroups I am subscribed to. I have always wondered the relationship between oil and gas prices, and a first look is quite interesting:
There are quite a lot of missing variables in the gas data, so I had to thicken the line a bit.... But you can still notice the episodes where gas prices have been relatively tame compared to oil prices and vice versa.

You will see me me mention this data more, after I clean it up (or have my economist friend clean it up for me). But one thing to mention: This data could be really useful for a better gauge of the transmission of oil prices to inflation...

And in case you are wondering, the original source is OPET.

And for some more shameless advertising, TDM lets you download your own data as well. It is a bit convoluted at the moment, but my friends over there promised me they would provide instructions soon...