Scenes From A Central Bank: A Turkish Tale in Two Acts

Posted on April 2, 2013 by iMFdirect

By Robert Tchaidze and Heiko Hesse 

In mid 2010 the Turkish central bank decided to introduce a policy that increased uncertainty in interest rates hoping that would stop foreign investors who were pouring money into the country in search of a quick buck. That’s right. ‘Keep calm and carry on’ was replaced by ‘Keep them guessing.’

The Turkish economy was overheating.  Money poured into the country from foreign investors attracted by a strong economy and high yields. A lending boom resulted in excessive growth along with an appreciating exchange rate and widening current account deficit. While evidence of success, these kinds of capital inflows are a headache policymakers would rather avoid, as they expose a country to risks that affect the economy and financial system as a whole, while undermining the objective of controlling inflation.

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Filed under: Advanced Economies, Economic research, Employment, Europe, Finance, Fiscal policy, growth, International Monetary Fund | Tagged: , , , , , , , , , , , | 1 Comment »

Middle East and North Africa Face Historic Crossroads

Posted on November 27, 2012 by iMFdirect

By David Lipton

(Version in عربي)

Almost two years since the Arab Awakening started, the future of the Middle East and North Africa is in a flux, with fledgling democracies struggling to find their way and renewed outbreaks of violence adding to the challenges the region is facing. Some are starting to worry aloud that the revolutionary path may hit a dead end.

To me, a useful way to think about the present situation is that the region could end up taking any one of three alternative paths, as far as its economic future is concerned. We could witness either:

  • Economic deterioration, if squabbling over political power prevents stabilization, let alone reform;
  • Stabilization through a reassertion of vested business interests that would offer a respite from eroding economic conditions, but condemn the region to a return to economic stagnation or at best tepid growth;
  • Or we could see a new economy emerge, as newly elected governments gradually find a way to end economic disruptions and undertake reforms that open the way to greater economic opportunity for their people.

While the first two paths would be undesirable, they could come to pass. Needless to say, the third path of transformation would be best.

No doubt the Arab countries in transition will chart their own paths. But I strongly believe that the international community also has a role in helping them avoid the unfavorable outcomes. Let me share some thoughts on how we can provide support.

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Filed under: Africa, Economic Crisis, Economic research, Employment, Europe, Finance, Financial Crisis, Globalization, growth, IMF, Inequality, Investment, Middle East, Politics, Public debt, عربي | Tagged: , , , , , , , , , , , , , , , , , , , | 3 Comments »

Lost & Found in Eastern Europe: Replacing Funding by Western Europe’s Banks

Posted on June 13, 2012 by iMFdirect

By Bas Bakker and Christoph Klingen

With Western Europe’s banks under pressure, where does this leave Europe’s emerging economies and their financial systems that are dominated by subsidiaries of these very same banks?  There is little doubt that the era of generous parent-funding for subsidiaries is over.  But parent bank deleveraging—selling off assets, raising capital, and reducing loans, including to their subsidiaries—need not translate into a reduction of bank credit in emerging Europe.

A credit crunch can be avoided as long as parent banks reduce exposures gradually and domestic deposits, other banks, and local financial markets fill the void. Policymakers should create the conditions for this to happen.

The ties that bind

The dependence of the banking systems in emerging Europe on Western European banks is well known:

  • Ownership— foreign banks control more than half of the banking systems in most of Central, Eastern, and Southeastern Europe. Their share exceeds 80 percent in Bosnia, the Czech Republic, Croatia, Estonia, Romania, and Slovakia. Only in Russia, Ukraine, Belarus, Moldova, Slovenia, and Turkey do they not dominate.

Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Finance, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments »

Life after the Crisis: A Perspective from Emerging Europe and Central Asia

Posted on October 8, 2009 by iMFdirect

By Caroline Atkinson

The Program of Seminars takes place outside the formal framework of the Annual Meetings. But to many people, they were the main reason for making the trip to Istanbul.

The program’s October 4 offering included a first-hand perspective of how three emerging market countries—Turkey, Slovakia, and Ukraine—have weathered the crisis. We also got a glimpse of the methodology the IMF is using to become better at sounding the alarm if it sees new vulnerabilities building up in the world economy.

More Europe, not less

Ukraine was running a high fiscal deficit at the outset of the crisis, which made it vulnerable when the global economy came unstuck, Vice Prime Minister Hryhoriy Nemyria said. The lack of progress on structural reforms had reinforced the external shock, and had brought home just how dependent the country was on just one sector, steel, which accounts for 40 percent of all export earnings. (more…)

Filed under: Annual Meetings, Economic Crisis, Emerging Markets | Tagged: , , , , , , , | 1 Comment »

Debating the IMF with Students

Posted on October 1, 2009 by iMFdirect

By Caroline Atkinson

In town for the Annual Meetings, Dominique Strauss-Kahn, our Managing Director, paid a visit to Bilgi University in the heart of Istanbul. He spoke to a gathering of students about the role of the IMF in the current crisis, and took some of their questions. 

The Managing Director likened the IMF to an “economic Red Cross” because its goal is to help solve a country’s economic problems while avoiding social unrest and war. He noted that the relationship between peace and economic stability was well understood by the people who founded the IMF in 1944, in the aftermath of the Great Depression and the second world war. 

Continuing with the medical analogy, he pointed out that countries only need IMF resources when they are “sick”—when they face serious balance of payments problems requiring policy adjustment. If you go to the doctor with a liver problem, he mused, the doctor will treat you, yes, but will also insist that you stop drinking. So policy conditions are necessary. Still, the Managing Director admitted, the medicine had sometimes been too bitter in the past. The IMF had developed a “harsh image”—not paying enough attention to local circumstances, political realities, or social consequences. It was seen as more of a policeman than a doctor. 

Strauss-Kahn at Bilgi University: IMF is like an “economic Red Cross” because its goal is to help solve a country’s economic problems while avoiding social unrest and war (photo: Stephen Jaffe/IMF)

Strauss-Kahn at Bilgi University: IMF is like an “economic Red Cross” because its goal is to help solve a country’s economic problems while avoiding social unrest and war (photo: Stephen Jaffe/IMF)

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Filed under: Annual Meetings, Economic Crisis, Low-income countries | Tagged: , , , , , , | Leave a Comment »

A Generous Host—Twice

Posted on October 1, 2009 by iMFdirect

By Caroline Atkinson

Many of the world’s policymakers are now on their way to Turkey to attend the Annual Meetings of the IMF and the World Bank, where they are expected to make further progress toward addressing the global financial crisis. 

And, equally importantly, the Meetings are a chance for Turkey to showcase its role as an important player in the global economy. 

At a packed press conference on September 30, Turkey’s Deputy Prime Minister and Economy Minister Ali Babacan said that Turkey’s hosting of “such strategically important meetings is a very important event…It is a new occasion to enhance the visibility of not only Turkey but also Istanbul.”   

Turkey's Deputy Prime Minister and Economy Minister Ali Babacan: "A new occasion to enhance the visibility of not only Turkey but also Istanbul” (photo: Stephen Jaffe/IMF)

Turkey's Deputy Prime Minister and Economy Minister Ali Babacan: "A new occasion to enhance the visibility of not only Turkey but also Istanbul” (photo: Stephen Jaffe/IMF)

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Filed under: Annual Meetings, Economic Crisis | Tagged: , , , , | Leave a Comment »

Amid Signs of Crisis Abating, IMF Invites Debate on Next Steps

Posted on August 3, 2009 by iMFdirect

By Caroline Atkinson

Welcome to iMFdirect, the International Monetary Fund’s new blog.

The global economy has pulled back from the brink.  Financial systems are beginning to function more normally. The panic that threatened to spread among depositors and savers earlier this year has receded. But enormous economic challenges remain, challenges that are often global in scope and may require a global response.

It is against that background that economists and policymakers at the International Monetary Fund are now preparing for the IMF-World Bank Annual Meetings in early October.  And as we do that, we wanted to open up our work to a broader audience. In coming weeks, senior staff and IMF management would like to discuss with you, through this blog, some of the key issues.

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Filed under: Advanced Economies, Annual Meetings, Economic Crisis, Financial Crisis, Fiscal Stimulus, IMF, International Monetary Fund, Low-income countries | Tagged: , , , , , , | 1 Comment »

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