Showing papers by "Erinç Yeldan published in 2003"

3 On the Structural Weaknesses of the post-1999 Turkish Disinflation Program

Abstract: Turkey initiated an extensive dis-inflation program in December 1999 backed and supervised by The International Monetary Fund (IMF). The Program aimed at decreasing the inflation rate to a single digit by the end of 2002. It exclusively relied on a nominally pegged (anchored) exchange rate system for dis-inflation and on fiscal prudence. In November 2000, however, just after one year from its introduction, Turkey experienced a very severe financial crisis which deepened and continued to-date. In this paper we highlight the structural weakness of the exchange rate backed dis-inflation program as manifested in its liquidity creation mechanism in a small and fragile financial system such as Turkey. We document the fragility indicators of the Turkish banking system, and show that the disinflation program led to an increase of the vulnerability of the banking system throughout 2000/2001. Given the structural characteristics of the Turkish banking system, we argue that the orthodox policy of fully connecting the monetary expansion and liquidity requirements of the domestic economy exclusively to the speculative short term capital flows was clearly a design flaw, overseen by the IMF's technical expertise.

Patterns of Financial Capital Flows and Accumulation in the Post-1990 Turkish Economy

Abstract: The purpose of this paper is twofold: using time series econometrics, we first investigate the determinants of short-term foreign capital inflows for Turkey following its capital account liberalization in 1989. We next investigate the changing nature of the private investment function under post-capital account liberalization and deduce hypotheses on its correlation with capital inflows and the key macroeconomic prices, such as the exchange rate, the real rate of interest, and real wages. Our results suggest that financial capital inflows have a significant negative correlation with the industrial production index and trade openness, and are positively correlated with real currency appreciation. Fixed private investment was found to have an inconclusive relationship with financial capital inflows. Real wage costs were observed to carry a significant negative relationship with private investment, indicating that at a time of currency appreciation, investors had to rely on declining wage costs in o...

Introduction: the rising hegemony of global finance and the demise of development

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