“The risk level is above the risk level in January 2002”


After having held the position of Vice President of the Central Bank in the period 2001-2006, Prof. Dr. Fatih Ozatayassessed the similarities and differences between the 2001 economic crisis and the current crisis at the ANKA news agency.

that the 2001 crisis erupted in February e “A strong economy program is implemented” Drawing attention, Özatay stressed that it is not difficult to reduce inflation, but that a serious program should be implemented.

Ozatay said:

MONETARY POLICY WITHDRAWAL FROM THE FIELD: The budget deficit was higher in 2001. Public debt was higher. Because there was an operation to save the banks. Now the public debt is lower and the budget deficit is also lower. Therefore, things are now easier in terms of what to do in fiscal policy. Under fiscal policy, the debt is low, but the foreign currency portion of the debt is larger. Therefore, it makes the current situation sensitive to exchange rate fluctuations. From the point of view of monetary policy, after the 2001 crisis, there was a serious monetary policy focused on inflation and the Central Bank was independent. Now the situation is bad.

Because monetary policy has withdrawn from the field. The head of the Central Bank can be dismissed at any time, a negative situation in the literature in terms of independence. When we look at banks, the current situation is much more positive… There was no question mark for the Turkish Statistical Institute (TUIK). There are now researchers who publish more inflation accounts on the same inflation account. They find it much higher, which raises questions about TURKSTAT’s reputation, right or wrong. Weaknesses need to be addressed.

HIGHER RISK LEVEL IN JANUARY 2002: In terms of results, then, in February the 2001 crisis erupted and in May the transition program to a strong economy was implemented. Inflation was 33 percent in February and when the 2001 crisis broke it was the lowest inflation of the last two years before February. It went from 33% to 74% in January 2002. It rose to 74 over a 12-month period, an increase of 40 points. So the program went into effect and fell quickly.

Now the situation is worse in terms of inflation. It started with September 19, 2021.Because I take September because the period the Central Bank started cutting interest rates is the period when exchange rate hikes are triggered. Now it has reached 78 percent, that is, where we come from is above 78, but 74, but this is still going on, it will increase. The rate of price increase was above 40 points, now it has increased by about 60 points and will increase further. In terms of risk, the level of risk we have reached is now higher than the level of risk in January 2002.

THIS IS NOT A DIFFICULT WORK, BUT FALLS WHEN DONE, DO NOT FALL IF NOT: If you implement a serious program both in terms of inflation, risk and exchange rate, these decrease. The peaks of the 2001 crisis are January, it is a little earlier in the inflation and exchange rate risk, it was the autumn months of 2001 and then it decreased continuously. This business will not fall, we know how inflation will decrease, after all it is not a difficult task, there is the experience of the country, there is the economic literature.

Raising a country’s potential growth rate is a difficult task, there are many different opinions, but there may be some who think differently, almost with the consensus of most economists, on how to reduce inflation. This is not a difficult task, but it falls when it’s done, it doesn’t fall if it’s not done. These are the main differences, and where the currant comes from is almost in the same place when you compare it to the stove back then.

Özatay’s assessment of the impact of the planned Federal Reserve Bank (FED) interest rate decision on Turkey is as follows:

IT’S WHAT YOU DO: There are many studies on this topic, for countries in Latin America, Turkey and similar countries. When their fragility increases, that is, when the problems of the economy increase, the interest rate increases of the central banks of the developed countries, in particular the Fed, force them. The weaker their economy, the more difficult it is, and if the economy is less fragile, it is less demanding. A rise in interest rates means that the less capital you go in, the more capital goes into it. A smaller inflow of resources from there means a decrease in the supply of foreign exchange. If your economy is good, it doesn’t matter much, it’s not a big deal. So it was in 2004. He ruled the world. Interest rates have increased in Brazil, Turkey and Mexico, but since a strong program was implemented in our economy, these effects remained temporary and disappeared after 4-5 months. Is it about what you do, does it affect you negatively? But if our economy weren’t in its current state, it would have little impact and we wouldn’t worry too much. It would raise inflation by one or two points, measures would be taken against it. But at the moment the inflow of capital to Turkey is very limited because the risk is very high, the residents have a tendency to foreign exchange and in such a context, when monetary policy is not in place and inflation is rising , this The decision of the FED and the European Central Bank to raise interest rates affects us severely, new negativities are added to the existing ones.

THERE IS NO PROGRAM TO CHANGE THIS, THE SAME POLICIES CONTINUE: Direction can be specified without using a template. Because it will increase because there are some important factors that will increase inflation from now on. First, there is pressure on the exchange rate, which is one of the important drivers of inflation. Although the Central Bank is selling foreign currency or public banks…, the exchange rate is rising and there is a negative factor here. If the ECB raises interest rates, there will be upward pressure on the exchange rate. It also makes this work stronger. The increase in producer prices is very high, which means that the prices of manufacturing goods are rising much more than the prices that are reflected to the consumer at the moment, it will have an effect over time … There is no program for change this, the same policies continue.

What can be done is clear, monetary policy will focus on inflation. You will change the law of the Central Bank, to improve its reputation. You will make it difficult again to dismiss Central Bank administrators, you will go back to the law in 2001. Monetary policy, you have to raise interest rates, you have to raise them a little … A global increase in interest rates is needed … After that, what remains is an understanding of the seriousness of monetary policy in the markets. You will not borrow from abroad in foreign currency to do in fiscal policy … It may be necessary to make TurkStat independent, in order to increase its reputation. These are all jobs that will reduce the unit of risk in the short term and the rest are areas outside the economy. Procurement Law for the Legal System, Rent Tax, Education System, Turkstat Independence, Judge Independence in the Legal System, etc. These would be targeted structural reforms to permanently lower Turkey’s risk premium. Others are steps towards stability, they are easier. Central Bank independence and TURKSTAT independence are also important works to gain reputation and immediately reduce the risk premium. All that remains is to show you how serious you are. Just because you did these things right away, suddenly everything won’t get better. Economic units and financial market players must see your seriousness and practice.


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