Kibritçioğlu, November 8, 2004, (1 Evaluation of Macroeconomic Evaluation of Macroeconomic Developments in Turkey Developments in Turkey with special focus on the real exchange rate misalignment with special focus on the real exchange rate misalignment Aykut Kibritçioğlu Aykut Kibritçioğlu Associate Professor of Economics Ankara University, Turkey Tel.: (+90-312) 319 77 20, ext. 340 Fax: (+90-312) 319 77 36 E-Mail: [email protected]Homepage: http://dialup.ankara.edu.tr/~kibritci/wiiw.html Vienna, November 11, 2004
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Kibritçioğlu, November 8, 2004, (1/81) Evaluation of Macroeconomic Developments in Turkey with special focus on the real exchange rate misalignment Aykut.
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Kibritçioğlu, November 8, 2004, (1/81)
Evaluation of Macroeconomic Evaluation of Macroeconomic Developments in TurkeyDevelopments in Turkeywith special focus on the real exchange rate with special focus on the real exchange rate misalignmentmisalignment
Policy makers and many researchers are interested in predicting and monitoring misalignment (M) in the foreign exchange market, because, in many cases, it is closely related to possible current account problems or impending currency crises.
This study mainly aims to discuss the sensitivity of estimation results to the alternative combinations of actual real exchange rate indices (A) and equilibrium definitions (E), by using quarterly data from 1987 to 2003 for Turkish lira.
The 16 measures of misalignment employed in this study show that the differences between these alternative measures vary between 6.5 and 36.5 percent points, which actually is a very strong indication for high sensitivity of the degree of misalignment to the selected combination of the A and E values.
Kibritçioğlu, November 8, 2004, (10/81)
65
75
85
95
105
115
125
135
145
19
95
q1
19
95
q3
19
96
q1
19
96
q3
19
97
q1
19
97
q3
19
98
q1
19
98
q3
19
99
q1
19
99
q3
20
00
q1
20
00
q3
20
01
q1
20
01
q3
20
02
q1
20
02
q3
20
03
q1
20
03
q3
20
04
q1
20
04
q3
1995 = 100
A1 (K&K)
A2 (TNT)
A3 (Reuters)
A4 (SPO)
CBRT-CPI
CBRT-WPI
JPM
Increase: DepreciationDecrease: Appreciation
notincludedin thesampleperiod
Actual Real Exchange Rates (A): Alternatives
1995=100, 1995.I – 2003.III
Kibritçioğlu, November 8, 2004, (11/81)
1995=100, 1987.I – 2003.III
Actual Real Exchange Rates (A): Selected A’s
65
75
85
95
105
115
125
135
145
1987
q1
1988
q1
1989
q1
1990
q1
1991
q1
1992
q1
1993
q1
1994
q1
1995
q1
1996
q1
1997
q1
1998
q1
1999
q1
2000
q1
2001
q1
2002
q1
2003
q1
1995 = 100A1 (K&K)
A2 (TNT)A3 (Reuters)
A4 (SPO)
Increase: DepreciationDecrease: Appreciation
Kibritçioğlu, November 8, 2004, (12/81)
A1: Trade-Weighted Real Effective Real Exchange Rate 1995=100; for 8 countries; PT Σ eWPIf , PN CPId ; A1 =
PT/PN . Source: SIS, CBRT and IMF’s IFS; authors’ calculations.
A2: Internal (TNT) Real Exchange Rate Index1995=100; derived by using implicit price deflators calculatedfrom GDP accounts: PT ( Px+ Pm) and PN Py-x+m ;A2 = PT / PN .Source: SIS and CBRT; authors’ calculations; deseasonalized.
A3: Reuters’ TRTWIN IndexJune 1999 = 100; for four countries; trade-weighted.Source: Reuters; the inverse of the original index; base year adjusted as 1995=100.
A4: SPO’s Real Effective Real Exchange Rate IndexJan. 1982 = 100; USD: 75% & Euro: 25%; for USA & Euro areaPPI and for Turkey WPI.Source: SPO; the inverse of the original index; base year adjusted as 1995=100.
Actual Real Exchange Rates (A): Properties
Kibritçioğlu, November 8, 2004, (13/81)
Real Exchange Rate Misalignment (M)
A1 A2 A3 A4
E1 M11=(A1–E11)/E11
M12=(A2–E12)/E12
M13=(A3–E13)/E13
M14=(A4–E14)/E14
E2 M21=(A1–E21)/E21
M22=(A2–E22)/E22
M23=(A3–E23)/E23
M24=(A4–E24)/E24
E3 M31=(A1–E31)/E31
M32=(A2–E32)/E32
M33=(A3–E33)/E33
M34=(A4–E34)/E34
E4 M41=(A1–E41)/E41
M42=(A2–E42)/E42
M43=(A3–E43)/E43
M44=(A4–E44)/E44
16 Different Measures of Misalignment According to 4 Different Actual Real Exchange Rate Indices and 4 Different Equilibrium Definitions
Kibritçioğlu, November 8, 2004, (14/81)
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
1987
q1
1988
q1
1989
q1
1990
q1
1991
q1
1992
q1
1993
q1
1994
q1
1995
q1
1996
q1
1997
q1
1998
q1
1999
q1
2000
q1
2001
q1
2002
q1
2003
q1
Maximum Misalignment
No Misalignment (Equilibrium)
Minimum Misalignment
M > 0 => Real DepreciationM < 0 => Real Appreciation
Degree of Differences between 16 M Measures
Kibritçioğlu, November 8, 2004, (15/81)
Degree of Real Appreciation of the Turkish liraprior to 1994 & 2001 Currency Crises (%)
Negative signed figures above indicate the degree of real appreciation of the Turkish lira, while positive ones imply a real depreciation. That is, negative-signed figures show to what extent the relevant A index is below its equilibrium level, and vice versa.
M11 M12 M13 M14
1993 (annual average) -18.0 -16.2 -11.1 -12.4
2000 (annual average) -24.1 -16.1 -9.7 6.0
2003.I -12.9 -13.1 -9.7 0.6
2003.II -22.7 -24.3 -17.9 -10.4
2003.III -29.7 -32.6 -22.9 -15.2
2003 (annual average) -21.8 -23.3 -16.8 -8.3
M21 M22 M23 M24
1993 (annual average) -12.5 -10.5 -6.2 -6.3
2000 (annual average) -10.2 -5.0 -5.2 -3.1
2003.I 5.6 6.3 -0.4 -4.5
2003.II -6.0 -6.6 -8.7 -14.2
2003.III -14.1 -16.0 -13.7 -18.1
2003 (annual average) -4.8 -5.4 -7.6 -12.3
M31 M32 M33 M34
1993 (annual average) -15.4 -14.2 -5.8 -4.5
2000 (annual average) -14.0 -8.1 -6.1 -3.2
2003.I -1.4 -4.8 -5.3 -8.4
2003.II -14.7 -18.2 -12.4 -13.9
2003.III -22.0 -26.8 -17.2 -18.5
2003 (annual average) -12.7 -16.6 -11.6 -13.6
M41 M42 M43 M44
1993 (annual average) -15.1 -13.8 -5.2 -4.9
2000 (annual average) -14.5 -8.7 -6.5 -2.9
2003.I -1.6 -4.4 -4.0 -6.7
2003.II -12.8 -16.8 -12.4 -16.7
2003.III -20.7 -25.9 -17.6 -21.1
2003 (annual average) -11.7 -15.7 -11.3 -14.8
The Relation between Misalignment and Currency Crises
Kibritçioğlu, November 8, 2004, (16/81)
60
70
80
90
100
110
120
130
140
1986
,01
1987
,01
1988
,01
1989
,01
1990
,01
1991
,01
1992
,01
1993
,01
1994
,01
1995
,01
1996
,01
1997
,01
1998
,01
1999
,01
2000
,01
2001
,01
2002
,01
2003
,01
2004
,01
Areu
Aspo
Ajpm
Acbcpi
Acbwpi
Actual Real Exchange Rates (A): Monthly Data
Kibritçioğlu, November 8, 2004, (17/81)
Real Exchange Rate Misalignment (M): Monthly Data
9.1
3.1
-20
-15
-10
-5
0
5
10
15
20
25
30
19
95
.01
19
95
.07
19
96
.01
19
96
.07
19
97
.01
19
97
.07
19
98
.01
19
98
.07
19
99
.01
19
99
.07
20
00
.01
20
00
.07
20
01
.01
20
01
.07
20
02
.01
20
02
.07
20
03
.01
20
03
.07
20
04
.01
20
04
.07
MSPO
MCBC
MCBW
MREU
MJPM
M > 0 => Real DepreciationM < 0 => Real Appreciation
History of Taxation in Turkish International Trade in Goods (1925-2002)
Ken
ned
y (196
7)
To
kyo
(1979)
Uru
gu
ay (1986-
1993)
GA
TT
(194
7)
Cu
stom
s Un
ion
with
the E
U
(1996)
Foreign trade liberalization in Turkey is closely associated to Turkey’s relations to the GATT/WTO and the European Union (EU).
Kibritçioğlu, November 8, 2004, (47/81)
Exports to Imports Ratio in Turkey (1950-2004, monthly)
The share of the agricultural products on exports decreased in Turkey, and the volatility of exports to imports ratio in Turkey declined since early 1980s.
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
50.0
1
52.0
1
54.0
1
56.0
1
58.0
1
60.0
1
62.0
1
64.0
1
66.0
1
68.0
1
70.0
1
72.0
1
74.0
1
76.0
1
78.0
1
80.0
1
82.0
1
84.0
1
86.0
1
88.0
1
90.0
1
92.0
1
94.0
1
96.0
1
98.0
1
00.0
1
02.0
1
04.0
1
mov.ave.
Kibritçioğlu, November 8, 2004, (48/81)
The developments in the exports to imports ratio show that foreign trade deficits are increasing since early 2002.
Exports to Imports Ratio (SIS, percent, as of 12-monthly totals)
64.4
73.6
4550556065707580859095
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
manufacturing
total
Kibritçioğlu, November 8, 2004, (49/81)
Export and Import Price Indices(1982=100, monthly averages)
70
80
90
100
110
120
130
1982
.12
1983
.12
1984
.12
1985
.12
1986
.12
1987
.12
1988
.12
1989
.12
1990
.12
1991
.12
1992
.12
1993
.12
1994
.12
1995
.12
1996
.12
1997
.12
1998
.12
1999
.12
2000
.12
2001
.12
2002
.12
2003
.12
2004
.12
External Terms of Trade Export Price Index Import Price Index 1982=100
Kibritçioğlu, November 8, 2004, (50/81)
Goods Composition of Turkish Exports and Imports(1969-2003, ISIC, percent)
Exports Imports
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Agriculture
ManufacturingMining &
Quarrying
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Agriculture
Manufacturing
Mining & Quarrying
Kibritçioğlu, November 8, 2004, (51/81)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
Consumption Goods
Intermediate Goods
Inv.G.
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
Consumption Goods
Intermediate Goods
Investment Goods
Goods Composition of Turkish Exports and Imports(1969-2003, BEC, percent)
Exports Imports
Kibritçioğlu, November 8, 2004, (52/81)
0
10
20
30
40
50
60
70
80
90
100
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Other Countries
Developing Western Hemisphere
Developing Middle East
Developing Europe
Developing Asia
Developing Africa
EU15
Industrial Countries (excl. EU15)
Country Composition of Turkish Exports (1980-2003, percent)
Kibritçioğlu, November 8, 2004, (53/81)
Country Composition of Turkish Imports (1980-2003, percent)
0
10
20
30
40
50
60
70
80
90
100
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Other Countries
Developing Western Hemisphere
Developing Middle East
Developing Europe
Developing Asia
Developing Africa
EU15
Industrial Countries (excl. EU15)
Kibritçioğlu, November 8, 2004, (54/81)
The increasing deficit in net exports of goods is eliminated by an increasing surplus in net exports of services, and hence the CAB deficits are declining since March 2004.
Current Account Balance: Selected Indicators (SIS, billion USD, monthly)
-2.60
-1.95
-1.30
-0.65
0.00
0.65
1.301
99
8.0
1
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Selected Events Net Exports of Goods (billion TL)
Net Exports of Goods and Services (billion TL) Current Account Balance (billion TL)
Kibritçioğlu, November 8, 2004, (55/81)
Current Account Balance: Selected Indicators (SIS, billion USD, cumulative)
-21.9
-9.8
-12.3
-24
-20
-16
-12
-8
-4
0
4
8
1998
.01
1998
.04
1998
.07
1998
.10
1999
.01
1999
.04
1999
.07
1999
.10
2000
.01
2000
.04
2000
.07
2000
.10
2001
.01
2001
.04
2001
.07
2001
.10
2002
.01
2002
.04
2002
.07
2002
.10
2003
.01
2003
.04
2003
.07
2003
.10
2004
.01
2004
.04
2004
.07
2004
.10
Selected Events Net Exports of Goods (billion TL)
Net Exports of Goods and Services (billion TL) Current Account Balance (billion TL)
However, the cumulative BoP data shows that the recent improvements have not fully translated into the annual data yet.
In 2003, the CAB/GDP ratio amounted to -2.8%. However, it will possibly climb to -4% in 2004.
Kibritçioğlu, November 8, 2004, (56/81)
-12
-10
-8
-6
-4
-2
0
2
4
6
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Erratic Nature of Net Short-Term Capital Inflows(billion USD, annual data)
capitalcapitalaccountaccount
liberalizationliberalization
capitalcapitalaccountaccount
liberalizationliberalization
19941994crisiscrisis19941994crisiscrisis
2000-012000-01crisiscrisis
2000-012000-01crisiscrisis
Kibritçioğlu, November 8, 2004, (57/81)
The effects of both current and capital account liberalizations realized in the 1980s can roughly be followed by the fluctuations in the CAB to GDP and net short term capital inflows to GDP ratios.
Current Account Balance to GDP & Net Short-Term Capital Inflows to GDP (%)
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
CAB to GDP Net Short-Term Capital Inflows to GDP
currentaccountliberalization
capitalaccount
liberalization
Kibritçioğlu, November 8, 2004, (58/81)
The monthly data shows that the volatility of the CAB to nominal industrial output is significantly lower than that of the net short-term capital inflows to output ratio.
Current Account Balance to Output & Net Short-Term Capital Inflows to Output(January 1999 = 1.0; as of 12-monthly cummulatives)
-2.8
2.11.0
-25
-20
-15
-10
-5
0
5
10
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Selected Events Current Account Balance to Output Net Short-Term Capital Inflows to Output
Kibritçioğlu, November 8, 2004, (59/81)
Political Process(Voters, Political Parties &
Bureaucrats)
Political Process(Voters, Political Parties &
Bureaucrats)
““Hot Money” Mechanism in Hot Money” Mechanism in TurkeyTurkey
High Public Sector Deficits
High Public Sector Deficits
High Real International Interest
Rate Differential
High Real International Interest
Rate Differential
Decreasing or Stable Nominal Exchange
Rates
Decreasing or Stable Nominal Exchange
Rates
Net Short-TermCapital Inflows from Abroad
Net Short-TermCapital Inflows from Abroad
interest rate parityinterest rate parity
......
It‘s not only “capital account
liberalization” itself which caused
macroeconomic problems in Turkey
after 1989.
It‘s not only “capital account
liberalization” itself which caused
macroeconomic problems in Turkey
after 1989.
But everything changes,if there is a CC at the door…
But everything changes,if there is a CC at the door…
FDI inflows into Turkey are far from being sufficient to improve the economy: Only 16.1 billions of USD within 23 years...
Kibritçioğlu, November 8, 2004, (61/81)
In 2003, Turkey’s GDP amounted to 240 billion USD, while its total external debts reached to 147 billion USD.
95 out of 147 billion USD amounting total debts are created solely by the public sector.
Selected Indicators of External Debts of Turkey (percent)
61.9
53.9
17.6
0102030405060708090
1998
Q1
1998
Q2
1998
Q3
1998
Q4
1999
Q1
1999
Q2
1999
Q3
1999
Q4
2000
Q1
2000
Q2
2000
Q3
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
Selected Events Public Sector's Share on Total Debts Total External Debts to GDP Short-Term to Total Debts
Kibritçioğlu, November 8, 2004, (62/81)
The ratio of international reserves to short-term external debts increased significantly after the 2000-2001 financial crisis, but in the AK-Party era it declined again slightly.
Reserves vs. External Debts (percent)
30.729.4 36.8
113.3
250.5
174.1
020406080
100120140160180200220240260280
1998
Q1
1998
Q2
1998
Q3
1998
Q4
1999
Q1
1999
Q2
1999
Q3
1999
Q4
2000
Q1
2000
Q2
2000
Q3
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
Selected Events Net International Reserves to Total External Debts
Central Bank's FX Reserves to Public Sector's External Debts Net International Reserves to Short-Term External Debts
Kibritçioğlu, November 8, 2004, (63/81)
Kibritçioğlu, November 8, 2004, (64/81)
Public Sector:Public Sector:Deficits and DebtsDeficits and Debts
Kibritçioğlu, November 8, 2004, (65/81)
The PSBR is a better indicator of the public sector in Turkey because it also covers the non-CB public institutions.
The PSBR is diminishing since three years, while the non-interest PSBR is improving.
Public Sector Borrowing Requirement (PSBR) and Consolidated Budget Balance (CBB)
-18
-15
-12
-9
-6
-3
0
3
6
9
1219
75
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Non-interest PSBR to GDP PSBR to GDP
Non-interest CB to GDP CB to GDP
Kibritçioğlu, November 8, 2004, (66/81)
Non-interest (primary) consolidated budget balance (CBB) seems to be stabilized with respect to nominal output growth, while the CBB (incl. interest payments) is diminishing since late 2003 again.
Cumulative Consolidated Budget Balance / Average Nominal Industrial Production
-150
-125
-100
-75
-50
-25
0
25
50
7519
98.0
1
1998
.04
1998
.07
1998
.10
1999
.01
1999
.04
1999
.07
1999
.10
2000
.01
2000
.04
2000
.07
2000
.10
2001
.01
2001
.04
2001
.07
2001
.10
2002
.01
2002
.04
2002
.07
2002
.10
2003
.01
2003
.04
2003
.07
2003
.10
2004
.01
2004
.04
2004
.07
2004
.10
Selected Events Primary Balance to Nominal Output CB Balance to Nominal Output
Kibritçioğlu, November 8, 2004, (67/81)
As a result of both the successful disinflationary policies and the Government’s increasing political credibility, Turkish Treasury pays now lower interest rates in domestic borrowing.
Compound, Weighted Auction Interest-Rates (Treasury, percent) & Confidence Index
25.4
193.7
15.1
-20
0
20
40
60
80
100
120
140
160
180
200
1998
.01
1998
.04
1998
.07
1998
.10
1999
.01
1999
.04
1999
.07
1999
.10
2000
.01
2000
.04
2000
.07
2000
.10
2001
.01
2001
.04
2001
.07
2001
.10
2002
.01
2002
.04
2002
.07
2002
.10
2003
.01
2003
.04
2003
.07
2003
.10
2004
.01
2004
.04
2004
.07
2004
.10
Selected Events Nominal Reel (ex ante) Reel (ex post) Real Sector Confidence Index
Kibritçioğlu, November 8, 2004, (68/81)
Public sector’s domestic debts increased sharply following the 2000-2001 crisis, both in nominal and real terms.
Domestic Debt Stock of the Public Sector (billion TL)
Public sector’s domestic debts in terms of USD are also increasing sharply...
Domestic Debt Stock of the Public Sector (billion USD)
20
40
60
80
100
120
140
160
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Kibritçioğlu, November 8, 2004, (70/81)
Public sector’s domestic debts seem to be stabilized with respect to changes in industrial production index within the last two years.
Ave. Domestic Debt Stock of the Public Sector to Ave. Industrial Output (%)
80100120140160180200220240260
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Kibritçioğlu, November 8, 2004, (71/81)
Since the latest general elections in November 2002, the public sector’s domestic debts increased more than 65 percent in terms of USD, while its external debts expanded only around 15 percent.
Domestic and External Debts of the Public Sector (billion USD)
45.2
84.9
140.4
53.4 79.9
92.2
0
20
40
60
80
100
120
140
160
180
1998
Q1
1998
Q2
1998
Q3
1998
Q4
1999
Q1
1999
Q2
1999
Q3
1999
Q4
2000
Q1
2000
Q2
2000
Q3
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
Selected Events Domestis Debts of the Public Sector External Debts of the Public Sector
Kibritçioğlu, November 8, 2004, (72/81)
Kibritçioğlu, November 8, 2004, (73/81)
Financial SectorFinancial Sector
Kibritçioğlu, November 8, 2004, (74/81)
Feb. '02
Aug. '97
Feb
. '01
Sep. '88
Feb. '87
Nov. '83
Aug. '82
May '80
Jun. '79
Dec. '82
Jan. '86
Nov. '90
No
v. '9
1
Oct. '93
Apr. '94
Oct. '94
Jul. '99
Oct
. '00
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5Ja
n-79
Jan-
80
Jan-
81
Jan-
82
Jan-
83
Jan-
84
Jan-
85
Jan-
86
Jan-
87
Jan-
88
Jan-
89
Jan-
90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
High Fragility BSF3 BSF2
Banking Sector Fragility in TurkeyBanking Sector Fragility in TurkeyBanking Sector Fragility in TurkeyBanking Sector Fragility in Turkey
Turkish banking sector experienced difficulties many times within the last 25 years, as a result of their own excessive risk-taking behavior in the past.
For Methodology: see Kibritçioğlu (2003), “Monitoring ...”.
Kibritçioğlu, November 8, 2004, (75/81)
The Turkish banking sector is recovering from the 2000-2001 crisis, and according to the BSF index, it is taking excessive risk again...
(The BSF3 index is a weighted average of real annual changes in foreign liabilities,
claims on private sector, and total deposits.)
Banking Sector Fragility Index
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
For Methodology: see Kibritçioğlu (2003), “Monitoring ...”.
Kibritçioğlu, November 8, 2004, (76/81)
The recent developments in the FL to FA ratio indicate that the external open (short) position of Turkish banking system is decreasing now...
Deposit Banks: Foreign Liabilities to Foreign Assets (percent)
708090
100110120130140150160
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Banking Sector Fragility in TurkeyBanking Sector Fragility in TurkeyBanking Sector Fragility in TurkeyBanking Sector Fragility in Turkey
Kibritçioğlu, November 8, 2004, (77/81)
The ratio of 1-month to 12-month deposit interest rates exhibits a different pattern after the 2000-2001 financial crisis: It is very close to 100 percent now...
Weighted Deposit Interest Rates: Ratio of 1-Month to 12-Months Interest Rates (percent)
75
95
115
135
155
175
195
215
235
19
98
.01
19
98
.05
19
98
.09
19
99
.01
19
99
.05
19
99
.09
20
00
.01
20
00
.05
20
00
.09
20
01
.01
20
01
.05
20
01
.09
20
02
.01
20
02
.05
20
02
.09
20
03
.01
20
03
.05
20
03
.09
20
04
.01
20
04
.05
20
04
.09
Kibritçioğlu, November 8, 2004, (78/81)
1
10
100
1000
10000
10000019
86.0
1
1987
.01
1988
.01
1989
.01
1990
.01
1991
.01
1992
.01
1993
.01
1994
.01
1995
.01
1996
.01
1997
.01
1998
.01
1999
.01
2000
.01
2001
.01
2002
.01
2003
.01
2004
.01
January 1986 = TL 1 January 1986 = USD 1
Istanbul Stock Exchange’s National 100 Istanbul Stock Exchange’s National 100 IndexIndex
Istanbul Stock Exchange’s National 100 Istanbul Stock Exchange’s National 100 IndexIndex
Kibritçioğlu, November 8, 2004, (79/81)
-100
0
100
200
300
400
500
600
700
800
900
1987
.01
1988
.01
1989
.01
1990
.01
1991
.01
1992
.01
1993
.01
1994
.01
1995
.01
1996
.01
1997
.01
1998
.01
1999
.01
2000
.01
2001
.01
2002
.01
2003
.01
2004
.01
January 1986 = TL 1 January 1986 = USD 1
Annual Increases in ISE’s National 100 IndexAnnual Increases in ISE’s National 100 IndexAnnual Increases in ISE’s National 100 IndexAnnual Increases in ISE’s National 100 Index
Kibritçioğlu, November 8, 2004, (80/81)
Kibritçioğlu, November 8, 2004, (81/81)
Inflation and interest rates are still declining gradually.
In the Turkish manufacturing industry, the labor productivity is increasing and real wages remain low, while the industrial production index is rising again.
There is still a deep unemployment problem in Turkey. Production increases are not fully translated into employment increases yet.
Excessive risk taking behavior of the banking system (in terms of the BSF index) is expected to decline towards historical averages.
Real effective exchange rates indicate a slight depreciation of the Turkish lira.
Further structural reforms, stronger privatization efforts and continuity in political stability are needed in the country.
In Turkey, it is expected that a decision of the heads of EU governments next month in favor of the start of the accession talks for full-membership in early 2005 will positively affect the Turkish economy, particularly in terms of the FDI inflows.