Invitation to connect on LinkedIn

2011-07-14T13:25:00.001+03:00

Emre,

I'd like to add you to my professional network on LinkedIn.

- Emre

Emre Deliveli
Freelance Consultant & Economics Columnist at 'Self-Employed'
Turkey

Confirm that you know Emre

MIGRATION of the BLOG

2011-05-21T12:01:00.000+03:00

It is time to say goodbye... Well not really: Nouriel Roubini's new Economonitor site is up:

http://www.economonitor.com/

So are the new blog sites, including that of your friendly neighborhood economist:

http://www.economonitor.com/emredeliveli/

All my previous Roubini columns have been transferred there, and I set mobile blogging on my Bberry as well with Wordpress for Bberry....

In short, I am all set to go. Therefore, starting today, this blog will no longer be active, as I will be blogging over at my new blog.

Why did I decide to do that? Two reasons, mainly: First, I wanted to open myself up to new readers by joining forces with Roubini's Economonitor to satisfy my inflated ego. Second, I was sick of Blogger getting banned in Turkey from time to time. While I could easily work around the ban, thanks to my computer-whiz brother, my readers couldn't, so basta with that! So I was thinking of switching to Wordpress anway, so Wordpress + Roubini seemed like a good deal:)

Anyway, thanks a lot for following this blog, and I'll be glad if you follow me at Economonitor as well. The upside is that if you get tired of my mumbo jambo ramblings, more serious columnists, including Nouriel himself, i.e. those who don't squeeze football (soccer for you Yanks) to every third or fourth column and those without a huge eagle tattoo on their back, are only a click way...

If you were subscribed to this blog through email or RSS and can not do that in the new blog, or if there are other inconveniences, please let me know via a comment here or just emaling me @ emre.deliveliATgmail.com. I am very new to Wordpress, but Roubini has IT guys who are quite proficient, judging by design of the Economonitor site in general and more specifically, my header:), so I will forward any requests to them...

It has been a good run here at Blogger for almost 3 years. See you over at Economonitor!!!

The end of an era or two

2011-05-20T22:52:00.003+03:00

I learned this week that Hurriyet Daily News & Economic Review's South Weekly, to which your friendly neighborhood economist was a regular contributor, is no more:( Monday's issue was the last. I learned this when I called in the editor on Wednesday to keep my promise of a column for next week...

Anyway, I am listing below, along with hyperlinks, all my South Weekly editorials:

What lies beneath Turkey’s stellar tourism statistics?

Water Politics: What is so special about being near the water?

The dismal science for a dismal sector

The pursuit of happiness by economists

Nothing quiet on the (south)western front

But there is another end of an era, which is even more important, at least for me: Roubini's new Economonitor site, which will include outside bloggers, including your friendly neighborhood economist, is opening doors today. So I will not be blogging to this blog anymore. I am not erasing it; in fact, all my posts until now will stay, but I will be blogging at Roubini's from now on.

I will be sharing with you my new address later today or tomorrow...

Hadi hayirlisi:)....

Roubini Post: Jordanian Lessons for a Turkish Economist

2011-05-19T23:29:00.000+03:00

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...

This column is the result of my two-week consulting gig in Jordan and the second of two columns on the country. The first column, just my impressions on Jordan, is a fun and easy read and would make a nice supplement to this one.

I will have an extensive addendum in the next few days, where I will address reader critiques that I should have mentioned corruption as well as add in a few general observations on Jordan...

I really seem to have found my niche...

2011-05-17T21:21:00.000+03:00

...in the popularity department that is: Unless I write a controversial column, I seem to have settled down in the lower parts of Hurriyet Daily News & Economic Review's top-10 rankings:

I got quite a few comments with this one as well....

...although most comments weren't all that positive:) In fact, they were positive- in the sense that I learned that I have readers who care enough to tell me that they are disappointed with the column. And I appreciate all feedback, so I was happy at the end of the day:) As for the critiques, as I mentioned earlier, I will be addressing them in an extensive addendum in the next few days.

Pardon my appreance...

2011-05-17T19:07:00.002+03:00

.... while I am in construction, of the blog that is...

I just came back from a two-week consulting gig in Jordan and will be posting several posts in the next few days...

Weekly Hurriyet Column: Jordanian lessons for a Turkish economist

2011-05-16T19:22:00.021+03:00

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website.

I just returned from Jordan after a two-week consulting gig. Among other goodies, like lots of hummus and felafel, and of course Petra (I am still mesmerized, it definitely lives up to its hype), I ended up with two columns, one on my impressions on Jordan, the other on an informal comparison on the Turkish & Jordanian economies.This is the second column. If you'll look at the comments under the column, you'll see that I got quite a few arrows from my readers for failing to mention corruption in Jordan. I'll address those issues, as well as my general impressions on Jordan, in an extensive addendum, but first on to the column:

Two weeks in Jordan is enough to make you throw two decades of Economics down the drain. At least, part of it.

We teach in economics classes that a fixed exchange rate is not a good idea. You make yourself open to speculative attacks and lose monetary policy autonomy. It is argued that corner solutions, such as a fully flexible exchange rate or leaving one’s currency altogether, by adopting a common currency or another country’s, are preferable to in-between solutions like a fixed exchange rate.

However, being pegged to the dollar seems to have been working rather well for Jordan. Government officials and the IMF agree that not only has the peg played a vital role in anchoring inflation expectations, it has also helped maintain financial stability in a volatile region. As for monetary autonomy, Samar Maziad of the IMF finds that there is some room for flexibility in operating monetary policy in the short-run.

But some things never change. My time in Jordan has also reminded me that there is no secret formula for development. Each country has its own specific circumstances that it needs to take into account. Otherwise, you would be hard-pressed to explain why Jordan doesn’t fly and touch the sky despite an open economy, an educated workforce and success in attracting foreign direct investment.

Of course, Jordan has many constraints on growth as well, such as its small size and lack of water. But Singapore and Dubai have been able to overcome arguably tougher challenges. I must admit that size does matter, especially when you try to understand Turkish industry’s edge over Jordan’s, or make a comparison of the two stock exchanges.

The latter story is quite interesting. As Nader Azar, Deputy CEO of the Amman Stock Exchange, noted, when the Istanbul Stock Exchange opened 25 years ago, Turks would come to the ASE to learn. Now, the ASE sends people to the ISE for training, where average daily trading volume was 136 times higher in April, despite both exchanges having more or less the same number of listed companies. No wonder you see wild price swings at the ASE.

Another lesson is that just as you can’t force banks to lend less, you also can’t oblige them to lend more, either. Jordan is one step ahead of Turkey in that regard, as it is, to my knowledge, only depending on market mechanisms rather than Ali Babacan-like outright threats. While reducing required reserves in exchange for loans to small and medium-sized enterprises has not been deemed sufficient by bankers, it is nevertheless a useful first step.

You also appreciate the wisdom of the 1990s sitcom Seinfeld. As Kramer explains, “when there is no work, people are restless. Who do you think they come after? El Presidente!” While this is an oversimplification of events in the region, it also explains quite well the recent extra budgetary measures in Jordan, which have not only widened the deficit, but also have pushed debt dangerously close to the 60 percent legal ceiling.

Finally, seeing Jordan so serious about the reform agenda makes me wonder why Turkey’s ruling Justice and Development Party, with the extra security of robust macroeconomic fundamentals under its belt, has shied away from structural reforms. With their new investment law, the Jordanians are actively targeting the variables that factor into the World Bank’s Doing Business and World Economic Forum’s Global Competitiveness rankings. Many other countries are engaged in this rat race as well, so I am worried that Turkey is falling behind.

There is one more thing that Turkey lacks in comparison to Jordan: Decent falafel. You haven’t had falafel until you have had it at Hashem in downtown Amman. And now I need to go and get some before my flight back.

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 http://emredeliveli.blogspot.com.

Another decent performance

2011-05-11T22:52:00.000+03:00

I again made it to the top 10 with my impressions from Jordan:

Speaking of the column: If you thought I have an inflated ego (I know of at least one person who does), you are finally right: I do have an inflated ego after two week in Jordan: Being treated like the citizen of a regional superpower just felt great: Everyone was praising Turkish companies & products and of course the Turkish PM. Speaking of the PM, I am convinced that having him move to Jordan and become the PM there would be a definite Pareto improvement: Most Jordanians would love to have him, as I have heard some say that they would prefer him even to their beloved King. I and people who think like would love to see him go away. Of course, there is the problem of his supporters, but I believe they can be convinced to let him go under the pretext that he will help regional stability and even world peace...

Weekly Hurriyet Column: Impressions from Jordan

2011-05-09T10:26:00.015+03:00

I just came returned from Jordan after a two-week consulting gig. Among other goodies, like lots of hummus and felafel, and of course Petra, I ended up with two columns, one on my impressions on Jordan, the other on an informal comparison on the Turkish & Jordanian economies. So without further chit-chat, here is the first column:

I was rather surprised to see a deserted city when I landed in Amman on Tuesday night for a two-week consulting gig on the Jordanian economy, banking sector and capital markets.

My curiosity was satisfied soon enough: I found my hotel’s bar packed, with people glued to the screen watching the Barcelona-Real Madrid game. I learned from an analyst I was meeting with the next day that both teams are very popular in Jordan, and that as many as 1 million people (from a population of 6.5 million) may have watched the game on Tuesday.

The abundance of players with El Clasico experience on its squad may explain Beşiktaş’s popularity in Jordan over its two Istanbul rivals, who have their own version of El Clasico. But two Turks are more popular in the JK than any member of my beloved team.

Everyone here knows the actor Kıvanç Tatlıtuğ, although he is often mentioned as the “blond guy,” as his name is a challenge for Jordanians. The Turkish soap operas, mosalsas as they are called here, that made him famous are a big hit in Jordan as in many other countries in the region, and I was told that Jordanians watched the closing episode of Aşk-ı Memnu with teary eyes Wednesday night.

But even Tatlıtuğ’s popularity is dwarfed by that of Prime Minister Recep Tayyip Erdoğan. The first thing taxi drivers do when they learn I am Turkish is to mention his name with a big smile. I receive a much more sincere “Wa alaykum salam” to my “As-Salamu Alaykum’s” (I have used the phrase more in the past week than the rest of my life) when it is known beforehand that I am Turkish.

It seems the “one minute” and “flotilla” incidents have won the hearts of Jordanians as in the rest of the Arab world. Although I had dismissed both as cheap politics at the time, I have to admit I do like the free respect they have brought me here. Yes, I am such a spineless opportunist!

Joking aside, seeing the teary-eyed refugees looking at the Golan Heights and the Sea of Galilee from the lookout point at the Decapolis city Gadara/Umm Qais is worth reading a dozen books on the Palestinian problem. But I am still not convinced that Erdoğan’s outbursts have brought us closer to a solution at all.

However, even the analysts, economists and executives I have been speaking to, all with fancy U.S. degrees and flawless English, think highly of Erdoğan. They may start with disclaimers such as, “I don’t know your political inclinations, but…” showing that they are well aware of the controversies surrounding him and his policies. Still they praise his zeal to make Turkey a regional leader by increasing its political and economic power in the Middle East.

That economic power is apparent in the statistics: According to the Central Bank of Jordan’s Monthly Statistical Bulletin, Jordan’s imports from Turkey increased from around $450 million in 2009 to $600 million last year. The 28 percent yearly increase puts Turkey at the number six spot, but the countries whose exports to Jordan have increased more than Turkey’s all have much smaller absolute figures. In fact, Turkey is now the seventh-largest exporter to Jordan, and I am not sure the mosalsas are in these official statistics.

But even casual observation reveals a strong Turkish business presence: For one thing, hearing Turkish regularly at my hotel speaks volumes. Many Jordanian ready-wear apparel companies have clothing manufactured in Turkey, to which they affix their own labels. Sarar’s suits are highly regarded by professionals, although the $200-$300 price tag is deemed a bit expensive. Supermarkets are full of Turkish products, mainly by the Ülker group. There are also several construction companies in Jordan.

As for Jordan’s economy, that’s for next week.

* 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 http://emredeliveli.blogspot.com.

Another update in process

2011-05-09T06:51:00.000+03:00

As I mentioned before in the column, I am in Jordan, in the middle of a consulting gig for the Jordanian economy, banking sector and capital markets.

My hotel does have super-fast internet, a nice work table with audio/video, S and HDMI cables on the wall and even free coffee and tea to help me with the long blogging sessions, but time is the binding constraint: As a result, I have neglected my blog a bit.

I will not be able to blog much until I am back to Turkey on Monday, but I will at least put my Hurriyet / Roubini columns in so that my readers who follow me from the blog can have a look at them.

Roubini Post: Turkey: Financial Center Dreaming - II

2011-05-05T23:59:00.019+03:00

I just noticed I forgot to put this Roubini column, which was published exactly two weeks ago, to the blog. Uppsss.... But I will still post it, as it is not time-sensitive at all. I am using the date it was published, just for archiving purposes...

Anyway, it already appeared in Hurriyet Daily News; 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...

And please note that the column is numbered "II" because I had written on the subject before.

Weekly Hurriyet Column: Financial Center Dreaming - II

2011-05-02T07:01:00.000+03:00

Below is my Hurriyet Daily News & Economic Review column for this week (it is actually last, as I am posting this exactly a week late, but I am sticking to its original date for archiving purposes), which you can also read at the Daily News website. As for the title, yet another cheesy one, or at least one mildly so: I was loosely referring to the Kusturica movie.

As for the addendum, I have ten pages of notes from the meetings, some of which are quite interesting, but have no time to add them. The good thing is that they are not time-sensitive at all, so it will be OK even if I add those in a couple of weeks.

Anyway, on to the column:

The government has been dreaming about carving a financial center out of Istanbul ever since economy czar Ali Babacan first disclosed the Istanbul Finance Center, or IFC, strategy and action plan, or SAP, to great fanfare on the eve of the IMF-World Bank meetings in Istanbul.

That press conference was marked by a lack of foreign journalists, hinting that they had taken the idea with a grain of salt. The foreign economists I talked to during the meetings humorously (and politely) mentioned the traffic as the biggest obstacle, and I and Kaan Sarıaydın shared that skepticism in a column at the time.

One and a half years later, I had an opportunity to learn how much ground has been covered with that SAP in the Istanbul Finance Center: Perspectives and Creating Stimuli conference organized by the Foreign Economic Relations Board, or DEİK.

In the keynote address, Babacan noted that they have covered 9 of the 71 action plans in the SAP and are working on 13 others. In the second session of the conference, representatives of the different state agencies involved in the project summarized their work. But the show-stealers were the morning and afternoon panels, which brought together a very impressive list of professionals sharing their views on the IFC.

I am happy to take Babacan’s word on the progress of the SAP so far and that it would be completed in the next five years. However, I do have serious reservations about such a laundry list approach that not only does not prioritize among the action plans, but also fails to take IFC’s objectives and its competition into consideration.

For one thing, one of the highlights of the conference for your friendly neighborhood economist was to learn that Jeju is not a Jedi knight. It is a special autonomous province in South Korea that would like to become a financial center. In fact, the panelists noted that many other countries, all the way from Russia to Colombia and Peru, have financial center aspirations.

According to them, the largest financial centers have lost some of their share to smaller ones as a result of over-regulation and a loss of confidence in developed economies after the crisis. In addition, several panelists highlighted that capital will no longer be as bountiful and cheap as in the past, which should strengthen this trend.

Therefore, as Domenico Siniscalco of Morgan Stanley noted, becoming a financial center is not an exercise in creation, but one in competition. And in that regard, Istanbul does not fare well: It is ranked 71st in the Global Financial Centers index prepared by the Z/Yen Group for the City of London, up one place from its latest ranking before the SAP was enacted.

If the government enacted the SAP and leapfrogged in these rankings, Istanbul would certainly attract more capital, but it would need more than that to become a financial center. As the panelists argued, Istanbul, and other contenders for that matter, needs to find its niche. Those specialties could be geographic or product-based: Commodities, derivatives, exchange-traded funds and Islamic finance were some of the recommendations.

It is at least positive that the government is willing to engage the private sector in the process. In fact, Laura Cox of PricewaterhouseCoopers noted that she was impressed by the level of consultation. I have learned that Babacan met the panelists in private the previous night, and State Planning Organization Undersecretary Kemal Madenoğlu confided in his closing remarks that the conference has shown him the need to hold discussions with domestic stakeholders right away.

Let’s hope that all this advice is made well use of before IFC turns into yet another one of the government’s “crazy” projects.

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

2011-04-29T08:40:00.001+03:00

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...

Roubini Post, Turkey: These Economists Are Crazy!

2011-04-28T08:20:00.000+03:00

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

In store for the next few weeks

2011-04-27T19:44:00.001+03:00

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!...

Another decent performance

2011-04-26T19:01:00.000+03:00

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:)...

My favorite Turkey graphs

2011-04-25T19:09:00.000+03:00

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...

2011-04-25T17:46:00.000+03:00

.... 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!

2011-04-25T11:27:00.000+03:00

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.

Friday's conference

2011-04-25T10:30:00.000+03:00

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.

Why I am voting for the CHP

2011-04-21T21:05:00.000+03:00

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)

2011-04-21T16:38:00.000+03:00

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

2011-04-21T15:14:00.000+03:00

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.

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

2011-04-20T17:35:00.000+03:00

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...

Competition Indices

2011-04-19T20:04:00.070+03:00

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...

Attention attention, ego getting inflated again:)

2011-04-18T18:40:00.000+03:00

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

2011-04-18T18:06:00.000+03:00

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:)

2011-04-18T01:52:00.000+03:00

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

2011-04-18T01:16:00.000+03:00

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

2011-04-18T00:07:00.000+03:00

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.

Please like me:)

2011-04-15T13:46:00.000+03:00

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:

http://www.facebook.com/pages/Emre-Deliveli/217133121634360

Thanks in advance for this....

I don't want to brag...

2011-04-15T10:56:00.000+03:00

... 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...

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

2011-04-14T21:19:00.004+03:00

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

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

2011-04-13T18:42:00.062+03:00

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...

I seem to have settled down...

2011-04-12T17:34:00.000+03:00

... 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...

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

2011-04-11T23:52:00.020+03:00

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 http://emredeliveli.blogspot.com.

Addendum to tomorrow's Hurriyet column

2011-04-10T11:56:00.003+03:00

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

2011-04-10T10:50:00.000+03:00

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...

Monday's column

2011-04-09T22:12:00.000+03:00

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)...

Roubini Post: A Turkey’s Growing Pains

2011-04-06T19:06:00.000+03:00

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

Another broken relationship

2011-04-06T19:00:00.000+03:00

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

2011-04-06T17:13:00.000+03:00

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

2011-04-06T16:03:00.000+03:00

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...

Another decent performance

2011-04-05T23:13:00.027+03:00

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"....

Weekly Hurriyet Column: A Turkey’s growing pains

2011-04-04T23:53:00.014+03:00

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 http://emredeliveli.blogspot.com.

Back yet again

2011-04-04T23:22:00.014+03:00

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

2011-04-04T01:46:00.000+03:00

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:)....

Oil and Gas

2011-04-01T18:15:00.000+03:00

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...

Seeing the CBT's dilemmas in action

2011-03-31T23:40:00.025+03:00

This past few days has been great for seeing the dilemmas of CBT's unconventional policies in action:

First, as you probably have heard me say it before, the CBT has to provide enough liquidity to the markets if it doesn't want market rates to be above the policy rate. What this means in practice is that when the Bank pulls liquidity via reserve requirement ratio hikes, it must increase its liquidity support through auctions by more or less the same amount.

I was meaning to show this for a long while, but BarCap has beaten me to it, so I'll just use theirs:

In other words, what the Bank taketh away, it giveth:)- BarCap uses a similar title for the article where this picture is, BTW, so they beat me to the title as well:)

But what happens if the Bank doesn't provide enough liquidity: Market rates go above the policy rate, as I mentioned above:

Total repo funding from the Central Bank had declined from TRY 30bn in March 21 to TRY 23bn in March 28th. And there goes the market overnight rate. The Bank increased it liquidity lines by TRY 2bn on Tuesday and Wednesday, and the market rates eased slightly, although they are still well the policy, i.e. the Bank's one-week repo, rate.

Roubini Post- Turkey: The (hi)King’s Speech

2011-03-31T23:17:00.014+03:00

I plan to do an addendum as usual, but I just couldn't get around to it- hopefully the weekend will be perfect for catching up...

Always remember, folks. You heard it first from Emre...

2011-03-31T22:58:00.019+03:00

As loyal readers would know, I strongly believe that a picture is worth more than a thousand words. What they wouldn't know, however, is that a video is worth more than a thousand pictures (BTW, so how many words is a video worth?):

First have a look at my interview with Jurgen Stark back from early October.

Then, read Herr Stark's commentary in the Financial Times today, which was also summarized as a newspiece in the same paper.

Rather strong words, indeed- Gosh, can't I just do without these cheesy wordplays for once?:)

Anyway, always remember, folks. You heard it first from Emre...

Metrics Day: Granger Causality

2011-03-31T18:07:00.000+03:00

I kinda liked the way I explained Omitted Variable Bias in the previous post, so let's call today metrics day: A reader recently asked me to explain Granger Causality in a way anyone on the street would understand it. Here is what I had to say:

"A Granger causes B if A always comes before B". I am aware that it is quite a bit of simplification, and it is not entirely accurate. But it does capture, I believe, the essence, and it also lets you to understand the main problem with Granger Causality: If an alien came to Earth and wanted to find out what caused Christmas, and all the data he had was the date of Christmas cards, she would conclude that Christmas is caused by Christmas cards:)

Anyway, if you want to teach yourself metrics, I would strongly recommend the Peter Kennedy classic as well as the new Harmless Econometrics book.

As a side point, I should note that metrics is anything but harmless, and although I have taught time series to undergraduates, I still do not consider myself even near mastering Econometrics. BTW, the reader's response to this last comment was "thanks for the motivation":):):)

The Stock Market and Elections

2011-03-31T17:45:00.000+03:00

With less than three months to general elections, I have been getting several emails on how "predictable" stock markets are before elections. I even ended up with a survey request from a respectable asset management division of a major bank, as they were getting opinions from a bunch of economists.

When you just had to look at ISE, you might find a pattern if you look hard enough (try the 2007 general and 2009 local elections):

But then if you go a bit deeper and consider how the ISE fared in relationship to other EM....

....The relationship suddenly disappears! Magic!:)....

Besides, the environment today is much different than in 2002, 2007 and 2009. For one thing, banks, which make up a considerable chunk of the ISE index, are faced with considerable pressure from the CBT and the government for curbing loan growth, measures bound to eat into profits of banks. The global environment is especially different than the last general elections in 2007, which was the last days of the so-called "new normal".

As a general point, such fast-track conclusions based on simple relationships, without controlling for everything else (global economic conditions, domestic economic conditions, etc) are bound to suffer from what economists call omitted variable bias.

The hyperlink is somewhat technical, so to illustrate my point with a more mundane example: A rather harsh critique of my previous week's column on the Turkish corporate banking mess noted that there would be no way to know that my friend's father had committed suicide because of other reasons; maybe, he was an alcoholic, maybe he had family problems... Those were not the case, but this is what OVB is all about...

More shameless advertising

2011-03-30T11:20:00.000+03:00

Since the Blogger ban has been lifted, at least for the moment, let me cut to the chase and say what I want to say right away:

My friends at Turkey Data Monitor just released the second version of their great data software:

It is much improved than the previous version, which I had reviewed, in terms of data viewing, editing and the like. Besides, it is also an economics aggregation portal, with news and commentary on the Turkish and world economy. The news and events go through the lens of Murat Ucer (el jefe), so he sort of picks out what he deems as the most important, which is very convenient for a time-constrained person like your friendly neighborhood economist.

As for commentary on the Turkish economy, they have reports from Turkish and foreign outfits such as Yapi Kredi and Nomura, as well as Hurriyet / Roubini columns of your friendly neighborhood economist. This last point is really important, as it, along with the migration of my blog to Roubini's new blog aggregation site (full details coming soon), is all part of my plan to conquer the world (hahahaha- the Dr. Evil laugh)....

Anyway, if you want to give it a try, their contact info is in the picture above...

More on Turkish foreceasting

2011-03-30T10:12:00.000+03:00

An anonymous reader made the following comment to my post on inconsistencies in forecasting:

Very good point! I do not believe any of the forecasters in Turkey have the guts to reveal their methodology. Some of them claim that they refrain from boring the reader with technical stuff(?!). I think, they just pretend and make us believe that they use appropriate techniques to generate those numbers. How the hell would we know? Hiding behind the so called "credibility" is not enough anymore. Of course, you could still be wrong despite all your efforts. But if you stick to the scientific metholodogy and do your part properly, then you can blame the data and nobody will accuse you of anything. Respect is an earned gift!

I thank the reader for her comment, as it clarifies an important issue: My comments were not aimed at TUSIAD per se, but to the most market economists in Turkey and abroad. OK, if you are not an academic, I don't expect you to write a full paper, but at least SKETCH your methodology. But there are a couple of exceptions: I really like Yapi Kredi and Citi Turkey because both Cevdet & Ilker (and their teams) clearly spell out how they do what they do... Cevdet likes to put it into the note, which makes most of his stuff difficult to follow for anyone without a couple of Econ. grad courses under her belt, Ilker in the appendices, but both follow this golden rule.

But there is a more fundamental problem with the TUSIAD report. It is very easy to see that there is a consistency problem, especially with the growth/ current account mix. Now, what they have done maybe makes sense. Quizas, I would have said Achsooooooooooooooo if I saw their methodology and congradulated them for their ingenuity. But I can't!

BTW, as I say in the post (and earlier), it is very easy to make sure your forecasts are consistent with financial programming. If TUSIAD had done that, I still would not know if their methodology is accurate or not, but at least, I would not have noticed anything...

Talk about consistency

2011-03-29T22:51:00.000+03:00

I had another frustrating day, with a couple of suppliers who were swearing they were selling at a loss (come on, try to a bit more convincing), so it is time for the occasional "taking my anger out" email...

I am often asked about my forecasting methodology; therefore, I sketched it out some time ago. I think the crucial part of any forecast is consistency; financial programming and its derivatives ensure that. Otherwise, you get some inconsistent results as in CBT expectations surveys...

The aggregation in CBT surveys could explain some of the inconsistency, but there is no excuse if a major NGO puts out a projections table on their front page full of such inconsistencies:

I managed to replicate some of the TUSIAD numbers with weird assumptions on oil prices, but there is no other way I can reconcile the figures, especially the current account and growth projections. I tried to find a background paper explaining the methodology, but all they have is a footnote saying that the 2001 scenarios have been developed with the "TUSIAD time series model", which is a complete black box to me. It is normal for the IMF and CBT not to reveal their models, but I would have expected a bit of transparency from TUSIAD, especially because they seem a bit unconventional....

Speaking of transparency.... No I will not post a nude picture with my eagle tattoo, that one is already in my Facebook and Twitter pages, but I was offered a position as chief economist of TUSIAD a few months ago and had to decline a few days before my agreed starting date because of personal/health reasons. Because of this fact, I thought it would have been unethical for me to criticize them, and so I held on to this post for a while. I have decided that since I was the one who rejected, there should not be any issue of ethics here... But as I a said, I just wanted to share this fact anyway for full transparency:)...

Another weird artefact of the Turkish recovery

2011-03-29T22:25:00.000+03:00

I have been talking about disappearing linkages for a while, and here's another one:

The link between employment and actual production has broken down, even if it existed in the first place. Have a look at this summary table:

This involves only the industry, and you see that industry is not faring that badly. But what is more troubling is services, where the increase in employment is way too high to be justified by the rise in production. I'll have more to say about this when the 4Q10 GDP figures are released on Thursday....

Disappearing Linkages II: Benchmark, ISE and the policy rate

2011-03-29T01:03:00.000+03:00

Loyal reader Abe Rudder has the following follow-up question to my recent post on disappearing linkages of the Turkish economy:

Speaking of linkages, how about the link between benchmark rate and ISE? and benchmark vs. policy rate? Do you have a picture for those? I remember you posted something about this over a year ago, but I couldn't find it.

She certainly has a much better memory than me; I have no recollection of that post, although I am sure she is right:) But here are the pictures she is asking for, courtesy of my friends at Turkey Data Monitor and your friendly neighborhood economist.

First, the benchmark and ISE:

Then, the benchmark and the new policy rate, i.e. the one-week repo rate:

I am not going to try to explain the relationships, as they are far from simple and not iron-clad, but here are the pictures, in case you want to make up your own story and post it as a comment here:)....

A "likable" chap....

2011-03-29T00:42:00.000+03:00

Another decent performance with this week's Hurriyet Daily News & Economics column:

But more importantly, both this piece and my South Weekly editorial, aka The Southbound, got three "likes" each on Facebook. I had always known I was a likable chap, but now I have documented it:)... Compared to some what great Turkish columnists Yigit Bulut the Toruk food (what a nice rhyme) and Suluman the Economist are getting, it is peanuts, but hey, it is enough for me:)... So thanks to the "likers" for "liking me", if you are reading these lines:)....

BTW, isn't the new version of Firefox, which you see above, just great? But it also makes me think how the three main browsers have converged: Firefox, Chrome and I.E. look more or less exactly alike now. And each has integrated the best parts of their competitors, i.e. there is no race to the bottom... Just made me think of some new growth or development economics models, but maybe that's because it is too late, so I should call it the day.

Hurriyet South Weekly Editorial: Nothing quiet on the (south)western front

2011-03-28T23:53:00.031+03:00

Today was a double-header: In addition to my regular weekly Economics column, I had another editorial, aka The Southbound, for Hurriyet Daily News & Economic Review's weekly supplement South Weekly, which appeared in today's issue.

As for title, I refer to paying homage to my favorite books and movies. I know it is kinda cheesy and even lame, but it actually quiet tame compared to what I pulled through with today's Econ. piece.

As a personal note, I was expecting to be sent to Silivri as an Ergenekon casualty with this thing. I even packed and waited for the cops in the hallway all night... Well, not really:)... I kind of knew that nobody cares about me and my beloved newspaper but this was still yet another tamer for my inflated ego. But this invisibility is good, not only for me (after all, I am still here, posting this, rather than share a cell with Mustafa Balbay or Cetin Dogan), but also for my beloved newspaper.

Anyway, without further chit-chat, on to the column:

Since my last South Weekly editorial “southbound” in January, it has been anything but quiet on the Marmaris front.

First, we were visited by a U.S. aircraft carrier. For a couple of days at least, I felt like I was in Santa Barbara during my daily jogs. Then came the Libyan refugees, that is, the Turkish workers who were evacuated from Libya. With people camping outside, it began to feel like Afghanistan.

At the same time, I was busy discovering the (un)ease of doing business in Turkey. After about a hundred trips to a dozen offices in Marmaris and Muğla, we managed to obtain permission to build a small dock in front of our beach.

As a footnote, I should mention that such docks are, by law, open to the public. Since I am doing a public service, and paying rental fees to the municipality in the process as well, I would have expected the procedure to be easier.

But maybe the fault lies with me, as a huge hotel is being built in the nearby village of Turgut, in a supposedly protected area. The villagers claim that one of the owners is the prime minister’s son, a Harvard graduate. He could just be cleverer than I am, or maybe, as George Orwell said, “All animals are equal, but some animals are more equal than others.”

By the way, the hotel is supposed to be based on Islamic principles, meaning that men and women would have separate beaches. And if you want to cool down with an ice-cold beer, you should head next door. I am all for multiculturalism and so applaud the bold newcomer.

However, speaking of alcohol, I have received several questions over at the blog, from readers who know about my moonlighting activities, about the effect of the most recent alcohol taxes on tourism.

To begin with, alcoholic beverages make up about 15 percent of the total costs of a large deluxe all-inclusive hotel. You may think this is not much, but for hotels already working with tight margins, it means a lot.

As for the effect on tourism: Make no mistake, the tourist arrivals figures that Culture and Tourism Minister Ertuğrul Günay loves to boast about will not be affected. Neither will the revenues. However, the profits of the all-inclusive hotels, which long ago negotiated their room rates with the travel agents, will be squeezed.

Not that it would have made a difference if they hadn’t already signed the contracts. As I argued in an earlier southbound, the tour operators have much more bargaining power than the hotels and therefore are able to dictate their prices at will.

Things are not rosier on the other side of the supply chain either. We teach economics students that the producer and the consumer share the cost of any tax, except in extreme cases where one carries the entire burden.

If there are only two beer producers serving Marmaris, they will be able to completely pass on the tax to the hotels. Not surprisingly, the entry of a third, low-cost producer this season has led to more competitive prices from the two big guys.

As readers of my weekly economics columns would know, I have been suffering from the same asymmetric power problem in my relationship with our bank. This predicament is a byproduct of the imperfect competition that characterizes many sectors in Turkey and is not specific to alcoholic beverages. But somehow, I increasingly feel that services are more subject to it than industry and among services, seasonal hotels suffer more than others.

Despite all this, everything will turn out well this tourism season. In case you are wondering how: I don’t know. It is a mystery…

*** 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 http://emredeliveli.blogspot.com.

Weekly Hurriyet Column: The (hi)King’s Speech

2011-03-28T23:16:00.016+03:00

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, you know I love cheesy titles, but I think I might have hit a new high (or low, depending on how you see it) with this one. A friend and reader had the following to say: "The (hi)King’s Speech??!! oh man this is just too much :)", to which I answered: "I know... I am one cheesy bastard, aren't I?:)"

I almost don't touch upon at all whether the reserve hikes will work or not, or what they mean, but that's what the addendum is for... I should have it over at the blog in the next 24 hours... And so on to the column:

If you were to believe the papers and analyst reports, the Central Bank of Turkey’s, or CBT’s, required reserve ratio, or RRR, hikes at last Wednesday’s rate-setting meeting were a complete surprise.

That may as well be the case, but it would reflect markets’ herd behavior more than anything else. For some reason, markets took CBT Governor Durmuş Yılmaz’s March 15 speech to, or rather interview with, the Wall Street Journal as irrefutable evidence that the Bank would stay on hold this month.

It is true that the Governor had noted that the Bank would “wait until the end of the month to assess whether its policy aimed at deterring hot money flows was working.” But those remarks refer to the policy rate part of the Bank’s two-pronged strategy, and the Bank did not change its one-week repo rate at last week’s meeting.

As for whether the RRR hikes were successful in taming credit growth, Yılmaz highlighted that “economists [would] need to wait until at least the end of March to judge whether his policy was working, because much of the impact from the increased reserve requirements had yet to feed through.”

The WSJ took all this, correctly I might add, to mean that the policy rate would be left on hold, but that RRRs could be increased again. So it seems that something was lost in translation. Moreover, at the one-pager after the previous meeting, the CBT was saying it would “monitor the tightening impact of the implemented policy mix until the next meeting, and take additional measures along the same line, if needed.”

In the same WSJ interview, the Governor also clarified the mysterious $10 billion of hot money that had left Turkey according to the Bank. Economists had been complaining that they could not find data to support the CBT’s claim, which I had found very odd: The numbers add up once you add banks’ off-balance sheet positions, which are mainly swaps, to the regular capital flows.

Interestingly enough, all the statistics, which were summarized in a short note by the CBT right before the Yılmaz interview was published, are in the Bank’s weekly press bulletin. I would argue that the off-balance sheet items should not be a measure of the effectiveness of the CBT’s goal of taming the current account deficit, as they are not directly linked to the deficit, but the numbers were always there.

In fact, it is the least-quoted part of the Governor’s interview that disturbed me most. Answering a question on fiscal policy, Yılmaz responded that he had asked the government to use the increase in tax revenues to pay down debt, and that the government had complied. While revenues were 17 billion Turkish Liras over the original target last year, the primary surplus was only 2 billion liras higher than planned. This hardly seems like “paying down debt.”

To sum up, I have been more critical than many on the Central Bank’s unconventional monetary policy mix. And while 4 percentage points seems like a big increase in RRRs, I don’t think it will be effective in curbing credit significantly: After all, it is more or less equivalent to a 25 to 50 basis points hike in the policy rate. I am also extremely dissatisfied, like the folks on 19th Street N.W. in D.C., with the Bank’s complacency regarding fiscal policy.

But I did not find any part of the Governor’s interview that could be misleading on the direction of monetary policy. Economists and markets have fooled themselves and are now blaming the Central Bank. As Yanks would say, a good listener would only need half a word, but even drums and clarions would not be sufficient for a bad listener, as a well-known Turkish proverb goes.

It seems that for some folks following the Turkish economy, the CBT needs to call on the whole orchestra.

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 http://emredeliveli.blogspot.com.

Roubini Post- Life, Debt and Death in Turkey

2011-03-23T22:15:00.000+02:00

Note that there is an addendum over at my blog, where I share a few of the dozens of interesting comments I got from my interviews with bankers, bureaucrats and the like...

Disappearing Linkages: The Budget

2011-03-23T19:05:00.000+02:00

One of the biggest Turkish econ. themes of the past couple of years has been the disconnect between seemingly-related variables.

I already talked about how VATs on imports, which used to be a good predictor of actual imports, led me (and everyone else) to an off-the-mark forecast. Another broken relationship is the one between cash and budget balance, to which Magfi Egilmez of Radikal pointed to in a recent column: The two series, which used to be more or less in sync, have become increasingly uncorrelated of late, with the latest figures being case-in-point:

The budget, which looks artificially strong, is one of the few topics I have in mind for next week's Hurriyet column. Actually, it was the strongest candidate until the CBT pulled yet another rabbit out of its hat this afternoon. But when I cover the budget, I will surely try to get to the bottom of this....

You know this is war, don't you?

2011-03-23T16:27:00.001+02:00

As the FT summarizes, the Central Bank of Turkey, or CBT, delivered huge hikes to required reserve ratios, or RRRs, across the board, with the exception of the longest maturities.

"Ouch!", as my friends at GlobalSource / Turkey Data Monitor noted in their short note. The Bank seems apparently determined in curbing credit growth. BTW, here's a good Turkish idiom to describe the situation, for my friend improving her Turkish on ekinler dize kadar, based on my recent woes with the baking system: "Ahini almak", which means, more or less, being hexed by someone for doing something bad to them:).... In other words, you don't mess with zhe Emre:)...

Now, turning back to business after this short Turkish diversion, these moves are, according to the Bank, are to drain TRY 19 billion of liquidity, so to prevent market rates go significantly above policy rates, we'll see an equal in liquidity provided by the CBT. So in other words, what the CBT taketh, He giveth:)....

BTW, the policy rate did not change...

The Perils of dealing with Turkish Statistics

2011-03-23T16:03:00.000+02:00

I just heard the weirdest thing from an anonymous source (now that you know my policy with revealing sources, I believe you won't ask who she is), while I was trying to get the license for a dock we are building in front of our beach.

Municipalities supposedly love to dish out occupancy permits before the elections. The idea is that you register someone in your district by giving them occupancy permits in an unregistered land and then get their vote in return. And to prevent that, the High Election Board, or HEB, has stopped giving out occupancy permits until the elections.

I wanted to have a quick look o data for myself:

Permits do indeed jump up, but not before elections: There is indeed strong seasonality, with the figures peaking every fall, for some reason I have no clue about:)... So if anyone knows why, I would be happy if you could explain as a comment to this post.

BTW, the dock I am talking about figures a great deal in Monday's South Weekly column, which will probably make will make me an Ergenekon causality. No hints for now, but I am sure it'll be a shocker. So be patient:)...

Addendum to Hurriyet column, Life, debt and death

2011-03-23T12:31:00.001+02:00

Here are the promised quotes / anecdotes from the a dozen or so people I talked to (bankers, bureucrats , consumers). More or less random order...

Oh, BTW, please don't ask me anything about my sources, such as whether they work for YKB or BRSA. If you plan to, please look at 00.35-0.45 of this great Mark Wahlberg clip from my favorite Scorcese movie first- movie buffs, I can hear you groaning, but Jack, Leo, Marky Mark, Matt and the supporting cast (Ray Winstone, Martin Sheen and Andy Garcia in particular) just stole the show... WOW, what a cast! Anyway, I don't want to be impolite, but I don't want anyone to get fired for ratting (1.07-1.21) on their company or violating the public employee act, either.

Anyway on to business:

They teach us to lie (private banker)

The bankers say that, but then continue to lie. The main problem, as in the developed world, is the bonus system (bureucrat).

My bank did not let me to talk at a conference. With so much lies, I am not surprised. (branch manager)

The Bank has no heart- when I ask something for them from the headquarters, all they want to know is whether I will continue working with them (branch manager)

This is a general problem; we are sorry that you have brought it up through us (YKB executive voicing regret at your friendly neighborhood economist for his latest Daily News column).

In addition, several bankers noted that they were ordered to cut down credit lines during the 2008-2009 crisis, and as a result had a lot of customers going bankrupt. But bankers also note that the situation would have been much worse if there wasn't so much competition in the sector.

I also got a very interesting anecdote, unrelated to this topic: A branch manager told me that banks are playing hide-and-seek with the BRSA and the government. Since the government wants to decrease credit growth, they have decided to advertise higher interest rates on their web sites. But when you actually call them up, they will still give you the low rate:)... Is anyone from the BRSA reading this, BTW?:) I mean, I hate dirigisme, but I don't want to be taken for an idiot, either:)....

Last, but not definitely the least, here is my closet-Carsi fan friend Sinan Akkaya, who is BTW the Almeida of my gang, quoting Brecht: "What's breaking into a bank compared with founding a bank?" BTW, the original German is "Was ist ein Einbruch in eine Bank gegen die Gründung einer Bank?" I have been trying to convince him to start die WeissFels-VerrücktDerwisch Bande (hint- translate the words to Turkish) with me, so maybe I'll achieve my goal soon...

Back with style:)

2011-03-22T00:18:00.001+02:00

aAfter last week's unfortunate absence, I am back with style- another double single...

Meaning top-10 berth in both most-read:

...And most-commented:

categories with my most recent column:

I owe this one to the banking sector as well as my own bank for getting my attention to the status of the Turkish corporate credit world.

Hmmm, the ego is starting to inflate again:)....

And just as a reminder: I will have an addendum in the next 24 hours of so, where I will be relaying some of the anecdotes I have taken from banking sector professionals during my inquiries of this issue...

Weekly Hurriyet Column: Life, debt and death

2011-03-21T16:20:00.001+02:00

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 was loosely inspired by a documentary I had watched long a ago.

BTW, the introductory paragraphs are inspired from here. Obviously, unlike some colleagues, I would mind if I am accused of plagiarism, so I wanted mention this right away. But on the contrary, I wanted to pay homage to a great movie, which you should see tonight if you haven't already, and the late Ulrich Muhe- such a great actor, I saw his other stuff after the movie; I would have never known him if it were not for this movie....

As for the addendum, I talked to quite a few banking sector professionals for the column, and they too are complaining about this issue. They shared great anecdotes and stories with me, and it would be a pity if I did not share those with anyone else. Therefore, I plan to write an extensive follow-up piece tomorrow for Roubini and my blog, where I will make use of all the quotes.

But I am still keen to collect more quotes, so if you have something to say/share about this issue, please feel free to add it on as a comment to the column, to this post or as an email to me. Use a nick if you want to be anonymous, but I am keeping all my sources anonymous anyway, as I don't want anyone getting fired for speaking ill of their bank with me. And boy some people did really speak out!!!

Anyway, on to the column:

The Turkish Statistical Institute’s grave-faced bureaucrats count everything, know everything.

And not only macro data that regularly find their way into your friendly neighborhood economist’s columns. For example, how many eggs were produced last month? 1.09 billion. How many books were published last year? 34,857. And how many telegraphs were sent abroad in 2008? Just one - and one telegraph was received from abroad.

But there is one statistic that probably causes even these paper-pushers pain: The suicide rate. On paper, this is one area where Turkey looks pretty good: Out of 100 countries or so that report this information, Turkey is 79th in terms of suicides per 100,000 people. But once you know someone who has committed suicide, this statistic takes on a whole new meaning.

At least, that was the case for me when my close friend’s father decided to take his own life after the bank from which he had taken a business loan unilaterally decided to charge him a higher interest rate following the 2006 crisis. At the time, I had found it hard to believe that banks could do that.

I guess one has to live it to believe it. I recently entered into negotiations to refinance a loan for my family business, which ended in an unconstructive deadlock, despite the word construction in the bank’s name. The lender pulled a huge fee out of its hat without giving any explanation as to how it was calculated.

Urged by my journalistic instincts, I began to inquire among my banker friends. It turns out that such fees are purely discretionary: They can be as high as 10 percent of the remaining amount of the loan, but could go down to as low as 2 percent after negotiations not much different from those in the covered bazaar.

Now, you don’t need to be Shakespeare to figure out that something is rotten in the state of Turkish corporate banking. And that is lack of regulation by the Banking Regulation and Supervision Agency, or BRSA. My friends in retail banking are absolutely terrified of the BRSA, but it seems the watchdog does not keep the corporate side on a tight leash.

On a macro level, this means that businesses asking for loans are faced with huge uncertainties: They have signed agreements strongly favoring the bank, which can, at will, change any part of the agreement and demand exorbitant fees. It also means that access to credit may not be as improved as the recent World Bank surveys claim.

Simply put, if you see your neighbor being squeezed by the bank, you’ll try to rely on your own funds or forego profitable investment opportunities if you don’t have the cash. This is especially important since the government is intent on capping credit growth at 25 percent, with dirigisme rivaling China’s if necessary. Then, the new loans would not necessarily be channeled to the most efficient uses.

It also means that the recent emphasis by the Central Bank and my esteemed colleagues on financial literacy is misplaced. It may be important for the retail consumer, but for corporates, financial literacy is not the answer. Look at me: I am as financially literate as anyone can get, but I still ended up with a huge refinancing fee despite sharing my “findings” with the bank.

If all this sounds like someone crossing over from capitalism to the Che-model, that is not the case at all. Regulation is not costless; it ends up making the regulated good more costly. But if the producer can exercise excessive power over the consumer, regulation is a must. As Mustafa Kemal Atatürk put it, "unless absolutely necessary, markets should not be interfered with. However, no market should be left entirely unattended."

It seems that the corporate banking sector is running completely amok in Turkey.

Red Tape in Action

2011-03-18T13:07:00.001+02:00

I will be back with a proper post on the budget soon, but let me share with you a small proof of Turkish red tape/bureaucracy.

Below are all the calls I made to the Turkish energy watchdog, Energy Market Regulation Board, or EPDK. I was trying to understand a change to the regulations regarding the electricity taxes we use at our family-owned and operated SME.

BTW, I got no answer at several of the numbers, so I should have made at least a couple of dozen calls in total. But all the people I talked to were extremely courteous, and when finally reached the right guy at the end, he was very helpful even though he could not solve my problem.

Speaking of EPDK, I saw at their web site a saying by Mustafa Kemal Ataturk (the founder of modern Turkey and cause of great pains to Antonia Banderas some time ago), which I had never heard of before:

Markets are not to be tempered with unless absolutely necessary, but no market should be let run freely. Sorry, this is the best I could do, but feel free to offer your own translation as a comment to this post.

WOW, this has just become my favorite Ataturk saying. But I am starting to think increasingly, based on my work at our family business, that many markets are unfortunately running amok in Turkey. More on that later, but the key words, as a reminder to myself when the time comes, are: Alcoholic beverages (shit, I forgot to address a reader response on that), electricity, banking- I can see some of my friends smiling, as they know the nonconstructive discussions I have been having with the latter for the past few weeks....

A first....

2011-03-14T12:21:00.000+02:00

No Hurriyet / Roubini column this week, as I had a terrible headache all weekend...

I still kinda don't feel well, but made it to work nevertheless. Anyway, I am more frustrated than anything else, as this is the first time I have missed a column since I began writing for the Hurriyet Daily News & Economic Review two and a half years ago: I had made it a point to do my column whatever the situation was- I wrote in when I was really sick, and I even managed to get it in when I was off to the championship game at Denizli.There is always a first, but I guess you can see frustration: After all that time, I missed one because of a stupid headache...

Top "Finance" Blogs

2011-03-11T19:34:00.000+02:00

Time's list of Best Finance blogs was making the email rounds this week, as I received the link from several sources.

My first reaction to an "ezik" friend was my shock!:) at not being in the list, to which he slyly responded, "you are no. 26; better luck next year":)...

I might seek consolation in the fact that this is an Economics blog, not Finance, but so are most of the top 25... Joking aside, I think it is a great list. As you can see, almost all the blogs from my own list from more than a couple of years earlier made it to the Time's list. But Even though it is more or less the competition, I would have still put FT Alphaville in if I were making their list. There are also a couple of blogs that I really like, like Rebecca Wilder and Models and Agents. They do not write a lot of stuff, so would have never made it to the list, but whatever they write is of very high caliber.

BTW, speaking of my own list, there have been a couple of changes to that since 2008. Brad Setser no longer blogs, as he is in the policymaking circles... And Roubini's blogs have become much much better... In fact, as you know, I have been contributing to his Economonitor blog site for a while now. In fact, Dr. Doom is coming up with a brand-new blog site, which will feature not only his writings and posts from analysts at his company, but "a few proud":) bloggers who have accepted to migrate their blog to his site. And I can tell you that this has something to do with my recent spoiler:) But I will be making the official announcement soon...

Roubini Post- A Turkish Woman Scorned

2011-03-09T21:39:00.000+02:00

Note that there is an addendum over at my blog, where I expand on some of the points I made in the column as well as introduce a couple of new ones...

Expectations versus Reality (II)

2011-03-09T19:33:00.000+02:00

As I mentioned before, one of my favorite movies in the great movie year of 2009 was 500 Days of Summer, and my favorite scene in the movie is the Expectations versus Reality scene, with the Regina Spektor song reflecting the protagonist's mood quite well.

I couldn't help but think that scene when I read, in the IMF's daily press summary email, CBT MPC member Turalay Kenc saying that inflation targets were well anchored and in line with the central bank's medium term inflation target (of 5.5 percent). See for yourself is that is the case:

In particular, I really liken the CBT to Tom, as they are, like him, seeing things as they want to see them: They are saying $8-10 billion of short-term hot money has left Turkey, but then they do not provide any evidence (if you have Turkey Data Monitor, Murat Ucer summarizes this issue there as well). They say credit is slowing down, although there are no such signs. They say there is still a large output gap, but all evidence points to the contrary.

And I am getting more and more convinced every day that the CBT will share Tom's fate, in the sense that the Bank's unconventional policy experiment will end in tears. I just don't know what song will be playing in the background when the tears start flowing.

BTW, this is one of the topics I am considering for this week's column. I'll have another "column ideas" post in the next couple of days...

Yet another addendum to an addendum

2011-03-09T13:12:00.000+02:00

An anonymous reader made the following comment to my addendum to this week's Hurriyet / Roubini column:

Why does the decline in agricultural employment not explain the decreasing LFP for women? If the data here (http://www.tradingeconomics.com/turkey/employment-in-agriculture-percent-of-total-employment-wb-data.html) is to be believed, agricultural employment in Turkey has decreased from almost 50% to about 25% over the last two decades.

Assuming that most of these women who were previously "employed" ("employed" rather than employed, because these "jobs" tend to be extremely informal in Turkey) in agriculture did not take up non-agricultural jobs when they migrated to the cities, this might explain the drop in LFP for women over the last two decades.

I don't think AKP has anything to do with it, actually I think AKP has passed some legislation (albeit insufficient) encouraging women's employment, and whatever you might think of Erdogan, he is not known for his opposition to women's participation in the labor force, quite the opposite, he actually explicitly said multiple times that he is a strong supporter of it.

Let me me clear: I was not saying the decline in agricultural employment does not explain (upps, again the dreaded double negation) the decrease in women's LFP; just that it is not sufficient to explain all of it. Why? Even without any sophisticated analysis, simple back-of-the envelope calculations reveal that very strong assumptions would be needed for all of the LFP fall to be explained solely by migration: You'd need something like all of these women working in the fields and almost none of them working in the cities they migrate to. I am not sure how the background paper of the World Bank study reaches the same conclusion, as I haven't seen the paper for over a year and could not find it, but it should be more or less the same logic.

But I agree with her that the AKP / Erdogan do not have much to blame for the decline in women's LFP. Even if increase in conservatism is playin a role, the the AKP and Erdogan have only been in power for the last decade, whereas women's LFP has been on the decline since the early 1990s. As much as I am a fierce critic of Erdogan's economic policies, such as playing the small-town merchant with the IMF Stand-by and the fiscal rule, I accept that he is never given the benefit of doubt, for fear that he has a hidden agenda- which I wouldn't know, as I am not his psychotherapist...

BTW, there is definitely something wrong with Blogspot: I was alerted of the reader's comment through email, but the comment itself is not where it is supposed to be. I was going to post it to the blog anyway, to make sure she sees my response, but still.... Luckily, I won't have to deal with Blogspot much longer: No, to the dismay of my perennial spammer, the CHP fanatic and a few others, I am not quitting. But having got my cues from the Turkish agricultural workers, I will be migrating as well. But more on that later: That deserves a separate post, but as a preview, I am officially joining forces with Dr. Doom...

Barely made it again...

2011-03-08T23:19:00.000+02:00

... to the Hurriyet Daily News & Economic Review honor roll, that is, with my latest column:

But honestly, it was the comments that rather pleased me. I got half a dozen, and all were high-quality, to the point that I used a few (or my responses to them) in the addendum to the column...

Addendum to Hurriyet column, A woman scorned

2011-03-08T22:16:00.000+02:00

Before I start, I should say I am very pleased with Turkish media for once. All the major dailies had super-duper coverage of International Women's Day. For example, my own Hurriyet Daily News & Economic Review had a nice complementary article to my column, concentrating on global comparisons. And I even discovered a blog called Turkish Women's International Network.

One point I could not discuss in my column, due to the usual space constraint, is the remarkable decline in Turkish women's labor force participation. As late as early 1990s, female LFP was at 50 percent. The most common explanation for the decline is the migration from rural to urban areas, which turned women working in the fields into women staying at home all day. But I doubt that explanation is sufficient. Reader "Me", commenting on my column at the Daily News web site, relates the decline to "the rise of religious thinking in the government". While I would not put it in those very words, I agree that the rise in conservatism has something to do with the fall in female LFP as well. Actually, that's one of the findings of one of the background papers of the World Bank study I refer to in the column.

Speaking of comments, I strongly recommend you to look at the comments to the column; they are all very interesting. The final comment, again by Me, is espcially important. By noting that the only solution is education, she has revealed a gap, not in my thinking, but in my explanation: Although I never said it explicitly, she is right that my economics-based solutions would work more effectively with poor, uneducated women. That's because it is those women who suffer most and have most to gain from these programs: Their unemployment is higher and LFP much lower, as documented in the World Bank study. This is not to say that white collar, educated women are not (upps, double negation) subject to discrimination, but they are relatively much better off than their uneducated counterparts. But that is another reason to argue for education as the only solution...

Finally, as for my suggestion of quotas for women political candidates, it seems that some parties will have self-imposed quotas in the June general elections.

What to make of today's Industrial Production?

2011-03-08T20:28:00.000+02:00

If I told you today's January Industrial Production came in at 18.9 percent yoy, but -13.2 percent mom, what would you say? You'd probably say "seasonality" or "base effects" and have a look my attempt to squeeze all essential Industrial Production data into one graph:, which might also be called "yet another effort to profusely confuzzle my readers":) :

I know it looks (and probably is) confusing, but it is simple, really: On the left and right axes, I have respectively yearly and monthly growth rates. With yearly rates, I have the raw data as well as working-day adjusted figures (obviously, seasonality would be redundant here); with monthlies, I have the overall figure as well as the seasonality & working-day adjusted one (swda).

BTW, this brings to my mind my post after the December Industrial Production, somewhat sarcastically, had noted that what for an uncloseable output gap we had, eliciting "UKALA" (know-it-all) from an anonymous commenter. After today's print, I am not shy to make the same comment again:

It is an strong print overall, but you can read the details in the note by Citi economists.

Speaking of output gaps, here's what reader Rower32 had to say recently, as a comment to my short take on February inflation.

This is what a REAL output gap looks like..

He is definitely right:)

Tying up loose ends III: Trade Deficit and the Exchange Rate

2011-03-08T13:12:00.000+02:00

A very belated answer to a reader...

I would like to apologize her for the late comment, which got delayed because of the blogger bans of last week and my attempts to overcome them. Anyway, the reader had the following comment about my post on the trade deficit.

I am convinced that the only way Turkey could simultaneously close its huge trade deficit and sustain a high growth rate (and bring down unemployment) is by manipulating its currency to gain a competitive advantage, like China, Korea and Taiwan do and Germany, Japan and some other countries did back when they were developing countries. Why oh why can't we do this?

That's not very easy to do when both your current and capital account are open. For example, you want to simulate the current account with a weak lira, but end up chasing portfolio investors away... There are smart ways of differentiating between capital flows, as Turkey and South Korea are trying to, with various degrees of success, but at at the end of the day, I feel that playing with the exchange rate is only a temporary solution. On the other hand, reforms that would make exporters more competitive and productive, such cutting down social security premiums and electricity costs, are for the long haul.

It is also questionable to what degree Turkey's exchange rate is prohibitive. For one thing, it is the real, not the nominal exchange rate (i.e. the cost of your goods relative to other countries) that matters for competitiveness. And looking at the real exchange rate reveals two important facts:

First, Turkey's real exchange rate does not look that overvalued compared to its peers, i.e. other emerging markets. As always, a picture is worth more than a thousand words:

Second, once you disintegrate the change in the exchange rate into nominal exchange rate growth and inflation differential between Turkey and the rest of the world, you see that, while the role of the nominal exchange rate cannot be ignored, an inflation in the 4-5 percent range over the long haul would be a big help as well:

So the best way to "manage" the exchange rate: Bring inflation under control!

Tying up some loose ends II: Roubini Post: A Phantom MENAce to Turkey

2011-03-07T23:47:00.001+02:00

This post already appeared in Hurriyet Daily News last 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...

Note that there is an addendum over at my blog, where I expand on some of the points I made in the column as well as take on a couple of extra channels of impact of the the MENA turmoil on the Turkish economy.

Tying up some loose ends I: Last Week's Performance

2011-03-07T23:24:00.000+02:00

The Blogger / Blogspot bans of last week threw me off schedule a bit, so I am just tying up loose ends, posting postponed posts...

Last week's Hurriyet column was yet another ego booster:

A respectable 6th place: My best performance to date of late...

Weekly Hurriyet Column: A woman scorned

2011-03-07T19:26:00.000+02:00

Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As you probably guessed from the title, I was celebrating International Women's Day in advance, in my own little way.

As for the title, there are several movies with that title or a similar one, but all are B-level, and I haven't watched any of them, so I was not really aiming for any specific one at all...

I will have an addendum as usual, where I will expand on some points I raise the column as well as discuss a couple of new ones, such as why women's LFP fell from 50 percent to nearly 25 percent in two decades. That'll probably be tomorrow...

Anyway, on to the column:

The Turkish Statistical Institute’s 2010 Labor Force Statistics, which were released last Tuesday, paint the well-known, but still dire, picture of female employment.

While women’s overall unemployment, at 13 percent, is 1.6 percent higher than men’s, the difference becomes huge once you look at non-farm unemployment, where female unemployment is a whopping 20.2 percent.

That’s because out of the 6.5 million women employed, 2.7 million work in agriculture, three fourths of whom are unpaid family workers. In fact, at 2.3 million, unpaid family workers significantly inflate the female employment statistics.

You could argue that informality is higher with women, so many working women do not show up in the statistics. But then you would also have to take into consideration Turkey’s public sector employment of 3 million. A sizable chunk of the 6.5 million women is employed by the state, inflating their employment figures much more than their male counterparts.

But the real tragedy of Turkish female employment is not the women without work, but those not in the labor force. Compared to 70.8 percent for males, female labor force participation, or LFP, is a mere 27.6 percent. In other words, Turkey is letting a large portion of its population sit by idly. In a recent study, the World Bank argues that increasing female LFP would have a significant impact on poverty.

But these women are not really sitting idly, are they? After all, they choose to stay at home, rearing their children and keeping the Turkish family fabric in place. Unfortunately, that is not the case. A survey designed as part of the same study finds that childcare is not economical for uneducated women, who would have to work long hours in the informal economy with low wages.

This is not to say that social and cultural factors do not matter in deciding whether or not to work. On the contrary, reasons like husband disapproval, safety concerns and losing face to friends and neighbors all come up in the survey as well. While it can take time to overcome these social barriers, it is possible to achieve some results quickly.

First, more flexible labor markets and programs that enhance labor demand for women would create job opportunities for them. The reduced social security premium for employing women in the recent Omnibus Law is a step in the right direction. I congratulate the unions for torpedoing the flexible employment bills and showing that they only care about protecting existing workers- and their leaders’ Hoffaesque lifestyles.

Second, childcare should be made more affordable through public or subsidized programs. Promoting such early childhood development programs could have an important spillover effect as well: In another study, the Bank argues that these early interventions could weaken the intergenerational transmission of poverty and inequality.

Finally, there is quite a bit of international evidence that vocational educational and training programs help women to get formal jobs as well as promote gender equality in earnings and labor market opportunities.

But doing all of these would not prevent the honorless honor killings. Nor would it suddenly improve Turkey’s honorable performance in the World Economic Forum’s 2010 Global Gender Gap report, where it ranked a dismal 126th out of 134 countries.

Even if Turkey improves on educational attainment and economic participation and opportunity for women, two of the four main areas measured in the report, it would still fall well short of equality on female political empowerment, its weakest point. Leaving my free-market philosophy for once, I would argue for quotas and minimum proportion rules.

By the way, before I forget, Happy Women’s Day!

There and back again: A Depek's Tale

2011-03-07T14:45:00.000+02:00

My nickname in high school was "depek", for having pronounced Depeche Mode as Depek Mode on a rainy morning when I was too sleepy, given to me by one "Testi"- I have no idea why his nick was "water jar"...

Anyway, it's there and back again, although you may not have noticed, as I have blogging drought spells from time to time, but I lost my access to Blogpost again on Friday. It seems that the internet providers were quick to override the DNS trick...

But it pays to have a brother who has an IT specialist. After a short change to my Windows settings, I was back online late Sunday night.

If you are reading this and are in Turkey, you have already solved this problem, and if you can't read it, you won't be able to see this:), but I'll say it anyway: If you email me, I would be more than happy to give you instructions, which would let you into my blog for good after a one-time, 5-minute work with your computer...

Today's Inflation in one Graph

2011-03-03T12:36:00.000+02:00

As I always say, a picture is worth more than a thousand words:

Uppssss.... So the core inflation, CBT's pride and joy for much of the past year, is creeping slowly (but surely and determinedly -is that even a word?) up...

Anyway, if you want to get the full details, have a look at the note by Citi economists. They also voice my concerns on the CBT's liquidity management...

Inflation

2011-03-03T10:16:00.000+02:00

February inflation is about to be released, and I am saying "pass" for a guesstimate. Here's why:

If these figures from Istanbul Chamber of Commerce's Istanbul data are any guide (they are quite often not), there are two opposing effects: On the one hand, food is likely to bring the headline figure down because of base effects. But household items jumped up. I would say it is the exchange rate, but pass-through should not be that quick- but then again- the lira has been weak since December.

And if you are wondering how the ICC headline as well as its food and household components fare with the official figures:

Headline:

Food:

Household expenditures:

BTW, before I could post this, the inflation was posted: It is 0.72% mom (4.16% yoy), right in line with expectations. I have not had a chance to look at the details, but I am guessing the Turkstat houseware item did not shoot up, which is predictable, given that the ICC series is much volatile than the official one.

FT on Turkish loans, again...

2011-03-03T00:19:00.000+02:00

FT Money Supply's Emma Saunders has taken on Turkish loans, as a continuation of her earlier post that the Turkish monetary policy experiment is working.

She is of course right to say that loans have grown 2.78 percent year-to-date. Let me provide the state of the banking sector in a comparative table:

But once you look at the details of the data, three facts emerge:

There is a big difference between private and public banks: While public banks have cut back on their loans, private banks haven't. That reeks of Chinese-style dirigent capitalism:)
Consumer loans and credit cards are going stronger than corporate loans.
Among corporate loans, loans to SMEs are the fastest.

I was going to provide a nice comparative table with the numbers, but I ran into some technical difficulties, which I will have to figure out with my buddies at Turkey Data Monitor in the morning.

I also think that regardless of the data, it is too early to evaluate if there is indeed a slowdown in credit growth or not. For one thing, these data are notoriously volatile, and besides, the latest reserve hikes came into effect only a couple of weeks ago.... So we just have to wait and see- and that's what the Central Bank is doing as well, at least at the moment...

Addendum to Hurriyet column, A Phantom MENAce to Turkey

2011-03-02T23:19:00.001+02:00

While my readers from Turkey cannot access the blog, I am continuing with the regular posts, in the hope that they will see it through Twitter or Facebook. And as promised, here's the addendum to this week's Hurriyet Daily News & Economic Review column.

First, while the impact of the MENA turmoil on the overall economy may be limited, the firms operating in Libya suffered a lot of property damage. Besides, some regions are bound to be hurt more by others. For example, there is a lot of anecdotal evidence, as well as some hard data, that Southeastern Turkey was not very badly affected from the 2009 crisis because of exports to MENA.

But at the macro level, one easy way to see the impact of the turmoil would be to look at the deterioration in the terms of trade. Unfortunately, terms of trade come with a lag of about 40 days or so for Turkey, but the folks at Nomura track these figures real-time for a number of countries. In a recent research note, they discuss the effect of the turmoil on the terms of trade, as well as provide the Bloomberg codes for their indices and a link to their methodology.

One important point I could not touch upon due to space limitations in the column was the impact of the turmoil on the banking sector: Turkish construction companies usually need letters of guarantees around 15 percent of the total project value. So applying the magic $15 billion number, we see that exposure of Turkish banks from this channel is slightly over $2 billion. This would be substantial increase to banks' gross NPLs, which are just short of TL20 billion, but as a percentage of total loans, it would be a mere 0.5-0.6 percent increase... BTW, a post to the Paratrend google group quoted the Eurobank Tekfen CEO saying that the banking sector risk to North Africa was around $2 billion. I would assume he would know his own business better than me, so it seems my guesstimate was a bit off, but even better...

Another impact would be on monetary policy. You could argue that if oil prices cause strong second-round effects on inflation through cost increases, the Central Bank might have to start raising rates earlier than it plans to. But on the other hand, to the extent that the turmoil leads to outflows and weak global demand, it could also lead the Bank to hold for longer. So the effect of the turmoil on monetary policy is "it depends", which is, by the way, the right answer to all the questions in the first round of the IMF's job interviews- to get an offer, the right answer is "it depends on the elasticities" in the second round:)...

Finally, since I am no political scientist, I will refrain from any comments on the changes in the region on Turkey in the long-run, even though I have been called an HBB (know-it-all) before. Here, you could make all sorts of arguments, that so-called experts are making on live TV debates for the past few weeks, such as how Turkey could be a model for the region, how booming middle classes in these countries could be a boon to Turkish exporters, and son on and so forth- Gosh, another of these extra-long sentences that my editor friend hates, she is going to strangle me:)...

As for oil prices, I am duly providing a couple of free-access FT articles: Here and here...

I am back....

2011-03-02T19:45:00.000+02:00

Just changed my DNS settings and I am back before you can say Digi Digi Digi:)... So much for the internet censure. But my readers from Turkey who do not know how to do that, or cannot due to disabled settings at work computers, still cannot access my column. What a bummer! But at least the posts are automatically feeding into Twitter and Facebook, so they'll be able to follow me there as well.

I will have two important post tonight, first the addendum to this week's Hurriyet column, and then an answer to a reader question.

It's great to be back!

A short absence

2011-03-01T23:11:00.001+02:00

Today, Blogspot got banned in Turkey again after two and a half years, again because of LigTV parent company Digiturk's rows with illegal broadcasts of live matches from blog sites. While Digiturk is right in principle, the solution is not to limit access to thousands of blogs, including that of your friendly neighborhood economist, to prevent access to a handful of sites.

Those of you following my blog from abroad will hardly notice anything, but I can not access my own blog to post anything, other than via email, at the moment. As a result, I will not be able to post in the next couple of days or so. However, I will be implementing a solution, either through changing my DNS settings, or through VPN, so I should be back soon... Obviously, I cannot do anything about my readers who live in Turkey and do not know how to get by the ban, but what they can do is to cancel their Digiturk subscriptions, like I will do as soon as I head home...

The Gang Back in Action

2011-03-01T15:29:00.000+02:00

Our gang of two traders and two economists was awfully quiet of late. We had a short exchange in relation to last Thursday's home sales figures on Friday:

As you can see in the graph above, on year-on-year basis, there is a sharp drop. And that's how the data was interpreted by the media.

But as the other (the more knowledgeable one) economist commented, these figures look normal after the sharp rise in home sales in 2009, accentuated by the weird second quarter figure. Besides, I agree with him that looking at yearly growth does not make sense in this case. After all, although it impossible to officially test for it, due to lack of data, it is tough to say that there is seasonality in home sales.

Weekly Hurriyet Column: A Phantom MENAce to Turkey

2011-02-28T23:56:00.019+02:00

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 managed to squeeze in both a wordplay and a movie reference. BTW, my friends at Global Source / Turkey Data Monitor came up with the same wordplay in their monthly, just a few hours after my column. As they say, smart people may not think alike, but they at least think of similar titles:)...

I will have an addendum as usual, where I will expand on some points I raise the column. But that will have to wait for a day or so... Anyway, on to the column:

With winds of change blowing in the Middle East and North Africa, or MENA, the Turkish media has focused on the impact of the turmoil on the domestic economy.

With all attention on Libya, the magic number is $15 billion. That’s the total value of the projects undertaken by Turkish companies in Libya during the last four years. Although the outstanding bills from these projects are not available, revenues from construction services abroad amounted to $1 billion last year.

Accounting for 15 percent of the revenues, Libya is in second place after Russia. All in all, MENA accounts for over a third of Turkey’s construction income, but the substantial discrepancy between the size of the projects and revenues has led me to believe that most of the revenues of the Turkish construction companies’ overseas businesses are retained abroad. Therefore, while some companies could face difficulties, the overall impact on the economy would be limited.

The same could be said of exports. Although just over one-fourth, or $30 billion, of Turkey’s exports were directed at MENA last year, the countries currently in turmoil received less than 5 percent of the total. Similarly, foreign direct investment from the region is negligible. Of the $7.2 billion that has come from MENA since 2002, nearly one half is from one item, the sale of Türk Telekom.

The phantom menace to Turkey lies in higher oil prices. I should tell you outright that I will not attempt to predict this year’s average oil prices. The forecasts out there go all the way from $100 to $220, and for every compelling analysis on why the oil shock is transitory, there is another one that argues it is permanent. One more guesstimate from a non-expert will not add much in this highly uncertain climate. Instead, I’ll go over the effect of oil price increases on the Turkish economy.

First and foremost is the impact on the current account deficit. The rule of thumb every Turkey economist knows is that a $10 increase in the oil price raises the country’s current account deficit by $4 billion. Working with percentages for a change, I found that the current account deficit would increase by 0.4 percent of GDP in response to a 10 percent rise in oil prices.

As for inflation, I am somewhat more pessimistic than the Central Bank: Although Gov. Durmuş Yılmaz recently noted that a $10 increase in oil prices would add 0.4 percent to inflation, I got the same number through a 10 percent rise.On the positive side, I found that the budget balance would improve by 0.4 percent of GDP as result of a 10 percent increase, mainly through import duties. When I integrated all these results into a growth equation, I surprisingly found a negligible effect.

But my models, and others for that matter, are limited in two important ways: First, they ignore the impact on the rest of the world. For example, if higher oil prices increase global inflation or decrease global demand, Turkish inflation and growth are sure to be negatively affected as well.

Second, and more importantly, while these models can handle a reasonable rise in oil prices, they would break down completely in the case of a huge oil shock, as all of the statistical relationships would fail. Then, Turkey would import much fewer barrels of oil and contract substantially, as would the rest of the world. This is the stagflationary scenario feared by Pimco’s Mohamed El-Erian, among others.

Otherwise, my basic predictions, all of which involve the number four, should be a good proxy for the impact of the MENA turmoil on the Turkish economy this year. In honor of the number of goals yielded by my beloved team in each of the last three games, I have decided to call this the “Beşiktaş rule.”

So Much for the Shrinking Trade Deficit

2011-02-28T12:34:00.031+02:00

The January trade balance was announced, and there goes my prediction that the import growth would slow down: At $7.3 billion, the trade deficit turned out to be much higher than market's ($4.1 billion) and my somewhat more conservative ($4.5 billion) expectations.

Reader Abe Rudder was quick to note my miss with a humorous comment:

Well, like everyone else (myself included) you also missed the target with a great margin. Pictures may be worth more than thousand of words but figures are always misleading :) at least when you are looking ahead.

I guess he is right. And he reminds me of the predictive power of economics of economists. Part of it has to do with the nature of the job, but the following words from Rower32 are worth thinking about as well:

A totally unrelated but funny quote from Warren Buffet's annual letter:
"John Kenneth Galbraith once slyly observed that economists were most economical with ideas: They made the ones learned in graduate school last a lifetime..." Just throwing it out there :)

So this is not a totally unrelated quote, after all:)...

Anyway, I did a pretty good job with exports, but imports just did not reflect fully the sharp fall in the VATs:

So what happened? I dunna!, but according to TEB Economic Research, "delay of tax payments by BOTAŞ (state-owned Petroleum Agency), could be reason for the disconnect between the tax payments and import volume in January." They also note that "if this is the case, this would mean that other energy enterprises could be accumulating arrears to BOTAS"...

Anyway, if you want the whole nine yards on the trade deficit, have a look at what Citi economists have to say. Incidentally, they adopt a similar line as me, on the impact of the MENA turmoil on the Turkish economy- this week's Hurriyet column, which I have yet to post to the blog...

The Best Thing about the Budget Data (and next week's most important data release, IMHO)

2011-02-27T12:51:00.000+02:00

...is the sharp drop in value-added-taxes, or VATs, on imports. It is a common Turkey economist trick to use import VATs to forecast actual imports, as the former is released a couple of weeks before the latter:

Although the relationship has not been picture-perfect, as you can see in the graph above, it still means that we could end up with a low January imports figure, which would mean that the CBT's policies have started to work... Doing a simple regression reveals that import growth could have retreated to around 20-25 percent year-on-year, or yoy.

We can also use preliminary exports data from Turkish Exporters Association, or TEA, to come up with a forecast of actual exports, which is in fact much more reliable than the imports estimate, due to the close relationship between the two, which somehow weakened in the last couple of years, but is still robust:

Getting my exports forecast from a simple regression between the TEA and TurkStat figures and combining the result with my imports projection, I end up with a monthly deficit figure of $4.5 billion. This would mean that the trade deficit widened around 28 percent yoy, which would be a remarkable slowdown in the pace of the widening of the deficit, even though it is still widening!

That's why, despite inflation is expected to come in just over 4 percent on Thursday on the back of base effects (mainly because of high food inflation last February), I believe that the most important domestic data release of the week will be tomorrow's January trade balance...

But since I started with the budget, let me finish with it. I just want to reiterate that the January budget, as summarized in the table below, is not nearly as good as it looks:

Why? The improvement in the budget is mainly driven by revenues (indirect taxes resulting from robust growth as well as non-tax collections such as privatization and transfers from the Unemployment Fund), whereas primary expenditures continue to grow at a rather robust pace. So no fiscal tightening, i.e. tandem fiscal policy, even though it is not pork barrel spending, either.

An Addednum to an Addendum: On "Tandemness"

2011-02-27T12:06:00.001+02:00

Here's Rower32 again (the second comment that did not appear in the blog, although relayed to me through email), this time on monetary and fiscal policy working in tandem, which I mentioned at the end of this week's column and then explained in an addendum:

There's section in Koo's book: "Fiscal Policy Determines The Effectiveness of the Monetary Policy" altho the situation in Japan was almost completely opposite. Ben Bernanke in a recent speech (can't remember which) echoed the same sentiments. But I still don't think fiscal and monetary authorities ever worked in tandem in Turkey. +it's election year..don't expect fiscal tightening anytime soon.

I should say that I was really anxious to make Koo's book my first non-fiction Kindle book, but found out (for some reason, my editor friend prefers "found" to "found out", so I took advice and used the former in tomorrow's column, but the blog is for imperfect English) that it is not available as an e-book:( What a bummer:(...

On Microeconomics (and CHP)

2011-02-27T11:38:00.000+02:00

Long-time reader Rower32 made two very interesting comments a couple of days ago, which, while relayed to me through email, for some reason did not appear in the blog. First, he answered to my plea for help with next week's topic:

Definitely something on income inequality! I didn't have time to do research on income inequality in Turkey or in other emerging economies in general. But it'd be nice to get some perspective. I've been reading a lot on that lately and my impression is you get different results depending on the way you slice and dice the data oh and on your political affiliation. But still the income inequality has been getting worse past 30 years in US and much of it is a result of tech innovation and education they say. Here's a good paper with tons of good stats and an interesting discussion with Robert Frank of Cornell.

I had already got another suggestion along the same lines:

Maybe you can write about unemployment, poverty, income inequality, i.e. things that people on the street care about.

Another blogger, after translating "cigeri bes para etmez" as "your liver is worthless" (I went for "your liver is not worth a penny"), gave a similar suggestion:

i think you should write more in microeconomics.these are things that interest people and affect their lives.

This was our editor-in-chief's advice to me when I first started writing for the Daily News as well. After highlighting that almost all the Turkish economics columnists were writing about bonds, stocks and the exchange rate, he stressed the importance of writing about microeconomics, what really effects the average person on the street...

Although I have written very few columns about asset prices, and have no intention of devolving (is that the right word?- the opposite of evolve, i.e. a backward evolution) into a market economist, I have not exactly followed David's advice, either. This is because I got my official training in hard-core macro, but I did mostly micro during my stint as a think-tanker, so I should be able to handle more micro.

Anyway, I will try to move into more micro columns, and the first step should be an analysis of the CHP's economic policies- I guess I want yet more insults:)... I could wait until they disclose the full thing, or do a column about the family insurance scheme in the next two weeks. But whatever I do, I'll be sure to integrate poverty, inequality and unemployment into the picture...

Muchas gracias to all those who took the time to comment...

Weekend Gossip: The Fund behind the Almeida transfer

2011-02-27T11:06:00.000+02:00

For the curious journalist following my blog:

A friend told me that he had seen football executive Peter Kenyon with Besiktas' Portuguese footballers Simao, Q7, Almeida and Fernandes at the Istanbul club 360, in early January right after the footballers' arrival in Istanbul.

As far as I now, Peter Kenyon has been involved in transfer deals since he left Chelsea in at the end of 2009. It seems that he decided to do this more professionally, as part of fund. So in case you were wondering about the fund that had financed the Almeida transfer, you now know... I'll leave it up to you to find out the name of the fund and Kenyon's exact relationship, but please do let me know:)...

The Menu for Monday...

2011-02-26T20:48:00.000+02:00

I have been thinking about three potential topics for next week's column:

The 2001 crisis: Tuesday was the tenth anniversary of the 2001 crisis. So to celebrate a decade without a crisis, at least a domestic-created one, I could write about lessons from and consequences of the 2001 crisis. This would also give me the chance to relate to the great comments by ex-CBT governor Sureeya Serdengecti at a conference I attended last month, which I am anxious to share.
The CHP's economic policies: I could write about this and get lots of nasty comments, similar to yesterday's, but from both CHP and AKP supporters (don't ask me how, it is a secret of trade), which would be a lot of fun:)- or not, as most comments would get censured by the Daily News web editors... But since their program is likely to be announced in March, it is better to wait for the details. This will also let me speak about inequality in Turkey, which a couple of readers have asked me to discuss.
The effect of the MENA tremors on Turkey: I could write about the channels through which Turkey is to be affected. I did some metrics on this yesterday, which will let me do a sad football allusion, so I am all set to go for it.

I am trying to choose between 1 and 3 at the moment, but kind of leaning towards 3. The way I figure, I could always do a late anniversary next week, but I am thinking I should strike while the iron is hot with respect to the Arab tremors... Anyway, I am heading for dinner, and should get to work by 22.00 Turkish time, by which time I should have made up my mind. So feel free to let me know which you prefer (or throw something else at me) in the next hour or so....

Still more on CHP....

2011-02-25T16:21:00.003+02:00

First, the good news: The family insurance scheme is finally up at the CHP's web site (in Turkish only). And it is the headline item, as it should be, so I guess me and all the many other critiques were right after all... BTW, a reader just noted that it was already there, but it definitely wasn't on the front page in the morning, as both me and Atilla Yesilada could not find it.

BTW, Radikal has asked their economics columnists what they make of the CHP's economic program, or rather the rough sketch of it as outlined by CHP top brass Umut Oran in his Radikal interview. Unfortunately, the article seems to be in the hardcopy version of the paper only, as I could not find it on their web page. In general, while the columnists applaud the end-results (i.e. objectives) of the program, they want to know about the means: For example, the party is aiming for 7 percent growth. How will they achieve that, given the country's savings-investment gap, and their claims that they will also cut the current account deficit? It is not that it can't be done; it just has to be spelled out. Or vague statements like "shifting the economy from hot money to production" need to be cleared up. While these are better than nothing, I hope they will release a serious document soon.

And as my general comment on the CHP's inability to provide effective opposition to the AKP: An expat friend (vital to stress for objectivity), who had read the insults and my answer, highlighted that many many well-educated, upper-class Turks tell her that there is really no viable alternative to the AKP. So throwing insults even at friendly advice is what I call the ostrich strategy: Bury your head in the sand and ignore the reality, living happily ever after in your dream world...

And it seems that the CHP footsoldier who attacked me this morning following my post on the party's undisclosed economic policy is by no means a lone wolf. Atilla Yesilada told me that the Artvin branch of the Ataturkcu Dusunce Dernegi (Kemalist Thought Institute) reproached him on TV for supporting the AKP's economic program. The poor guy is confused, trying to figure out whose side he is on. Sounds like me... I have really grown sick of people who are asking me why I work for a pro-AKP guy when they hear my work for polling firm KONDA, only because its founder, ex-CHP deputy Tarhan Erdem, has dared to criticize the part. All part of of the same witch hunt!

Speaking of the footsoldier, I never answered her insults, but just commented on their general tone. I just have two small comments for her: First, she claims I am wasting people's time. As I have said many many times before, unlike Besiktas, I am not forcing anyone to follow me, so anyone who finds reading my stuff a waste of time will never read it again. In fact, she should do that as well. Second, she claims no one finds my stuff interesting. She should go and check the popularity of my Hurriyet columns. Obviously, I am not Martin Wolf or Paul Krugman, but still my statistics depict a rather different picture.

BTW, I should say I am also thankful to her for providing my expat friend with a good text to study Turkish idiomatic slang. I translated for her "ipe sapa gelmez" and "cigeri bes para etmez" as "good for nothing". She is very happy with her new vocabulary.

Finally, I couldn't help but wonder whether the footsoldier got mad because of my calling Deniz Baykal "Denise the Menace". For that, I would argue that many think like me on Mr. Baykal's contributions to the CHP's perennial role in the opposition, as accenuated by this excellent caricature:

For those not experts on Turkish cinema, the caricature alludes to IMHO the best scene from Cagan Irmak's great movie Babam ve Oglum (My Father and My Son)... And the guy is supposed to be the PM, trying to prevent Mr. Baykal from leaving:)....

Proving my Point on CHP's policies

2011-02-25T11:21:00.001+02:00

Here's a comment that just came in to my post on CHP, which proves my point:

YUH SANA TERBİYESİZ, CİĞERİ BEŞ PARA ETMEZ HERİF!
HER GÜN İPE SAPA GELMEZ Bİ BOKA YARAMAYAN SÖZDE EKONOMİ YORUMLARI İLE İNSANLARIN ZAMANINI İŞGAL ETTİĞİN YETMEZMİŞ GİBİ, ŞİMDİ DE ANCAK MAHALLE KAHVESİNE YAKIŞACAK FUTBOL MUHABBETLERİNİ BLOGUNA ALMAN, AMA YİNE DE, UTANMADAN YAZDIKLARINA "ECONOMICS BLOG" ADINI VERMEN, EKONOMİSTLİK MESLEĞİNE HAKARETTİR.
ARTIK BİRAZ BÜYÜ, OLGUNLAŞ VE İNSANLARIN, YAZDIĞIN SAÇMALARI ÇOK İLGİNÇ BULDUKLARINI SANMAKTAN VAZGEÇ!
ALLAH BELANI VERSİN!

Having read this, you might have thought that I was throwing insults at the CHP. Have a look; I was merely noting that they should have made their economic program available...

Anyway, I am grateful to Mrs. Anonymous ("she" is my default use) for three things...

She has shown my readers exactly what is wrong with the CHP. Rather than come up with ideas and policies, they are letting people like her flourish by supporting a policy of unconditional hatred (Don't worry, the AKP is not much different, either).
She has shown the degree of polarization in the country, and especially the "if you either with us or against us" mentality so prevalent in Turkish society.
She has shown the typical Turkish way of debate by attacking my personality and throwing insults rather than providing civilized criticism. She could have easily politely explained why I am wrong (if the family insurance is readily available, she could have sent me the link, in which case I would have apologized), but then she wouldn't be a political bigot, like a considerable chunk of this country.

...Even though I would have preferred that she emailed me these wonderful comments and revealed her identity rather than hide behind the internet's veil of anonymity or better still speak them directly to my face.... After all, it is very easy to be an internet thug, but rather difficult to be a real one, especially when facing a disgruntled, ready-to-explode Besiktas fan...

How could I leave the media out?

2011-02-25T10:47:00.000+02:00

It wouldn't be proper if I left my morning bashing rounds without taking on the Turkish media. After all, when my "perennial spammer", who has been awfully quiet for a while BTW, first got in touch with me, she made it known that she was not happy with my miscellaneous interventions on the daily press, leading me to think (or rather deduce) that she was working for the Turkish daily Today's Zaman, the paper that usually gets my arrows. But how can I stay quiet when all the Turkish dailies are claiming that commodity prices are on the rise? Here's a screen grab from the financial data program Blue in my Blackberry:

I guess the Turkish press equates commodities with oil and agriculture!!! But I still thank them to let me test the screen-grabber program I recently installed on my Torch...

And these last three posts seemed more aggressive than my usual style, apologies: I am really not myself after Besiktas conceded a dozen goals in three matches (four-a-piece), and in only one week. That's what I call achievement:(...

Open letter to CHP

2011-02-25T10:15:00.001+02:00

I wasn't going to say anything, but after watching Atilla Yesilada take this on at his morning newsreading show, I have gathered enough courage (I took out a bottle from the CBT's bootlegged whiskeys to help me out) to speak out:

I had been wondering some time now what CHP's economics agenda is, so I was glad when news of part of their economic program, the "family insurance" scheme, began to appear in the papers last week. Apparently, there is a book that explains the program, but it is nowhere to be found! I emailed the CHP's web site, even asked a former MP to help me get it, but to no avail. And obviously there is no copy on the web. Come on guys, how difficult could putting a Pdf version on the web be? Definitely not more difficult than an Arabic web site...

Besides, we have yet to see CHP's full economic program. In an interview in Radikal yesterday, Umut Oran, one of CHP's top brass gave some hints, but only on the contents. It is three and half months until the elections, and I have no idea what the main opposition party's economic agenda is. Although the same Umut Oran (then an opponent of the CHP leader Denise the Menace Baykal) had accused the CHP leadership of not desiring to come to power, as Atilla Yesilada aptly put it a couple of hours ago, CHP is indeed still striving hard to stay in the opposition.

It seems that, although I am not sure it will last 1000 years, the AKP's rule is sure to be longer than the thousand-year Reich, which lasted only 12 years. Especially if the CHP's attitude on disclosing its economic program is any guide...

Emre Deliveli's Blog on Economics

Invitation to connect on LinkedIn

LinkedIn

MIGRATION of the BLOG

The end of an era or two

Roubini Post: Jordanian Lessons for a Turkish Economist

I really seem to have found my niche...

Pardon my appreance...

Weekly Hurriyet Column: Jordanian lessons for a Turkish economist

Another decent performance

Weekly Hurriyet Column: Impressions from Jordan

Another update in process

Roubini Post: Turkey: Financial Center Dreaming - II

Weekly Hurriyet Column: Financial Center Dreaming - II

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

Roubini Post, Turkey: These Economists Are Crazy!

In store for the next few weeks

Another decent performance

My favorite Turkey graphs

My-CHP hype cools down...

Weekly Hurriyet Column: These economists are crazy!

Friday's conference

Why I am voting for the CHP

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

So much for Central Bank independence

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

Competition Indices

Attention attention, ego getting inflated again:)

An invitation to hear my ramblings live

I am not a heartless capitalist pig:)

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

Weekly Hurriyet Column: The economic consequences of Mr. Erdoğan

Please like me:)

I don't want to brag...

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

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

I seem to have settled down...

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

Addendum to tomorrow's Hurriyet column

Writing Schedule for the next few weeks

Monday's column

Roubini Post: A Turkey’s Growing Pains

Another broken relationship

A few observations on inflation

Addendum to Hurriyet column: A Turkey’s growing pains

Another decent performance

Weekly Hurriyet Column: A Turkey’s growing pains

Back yet again

a sad situation

Oil and Gas

Seeing the CBT's dilemmas in action

Roubini Post- Turkey: The (hi)King’s Speech

Always remember, folks. You heard it first from Emre...

Metrics Day: Granger Causality

The Stock Market and Elections

More shameless advertising

More on Turkish foreceasting

Talk about consistency

Another weird artefact of the Turkish recovery

Disappearing Linkages II: Benchmark, ISE and the policy rate

A "likable" chap....

Hurriyet South Weekly Editorial: Nothing quiet on the (south)western front

Weekly Hurriyet Column: The (hi)King’s Speech

Roubini Post- Life, Debt and Death in Turkey

Disappearing Linkages: The Budget

You know this is war, don't you?

The Perils of dealing with Turkish Statistics

Addendum to Hurriyet column, Life, debt and death

Back with style:)

Weekly Hurriyet Column: Life, debt and death

Red Tape in Action

A first....

Top "Finance" Blogs

Roubini Post- A Turkish Woman Scorned

Expectations versus Reality (II)

Yet another addendum to an addendum

Barely made it again...

Addendum to Hurriyet column, A woman scorned

What to make of today's Industrial Production?

Tying up loose ends III: Trade Deficit and the Exchange Rate