Hledat v komentářích
Investiční doporučení
Výsledky společností - ČR
Výsledky společností - Svět
IPO, M&A
Týdenní přehledy
 

Detail - články
Turkey’s Hot-Money Problem

Turkey’s Hot-Money Problem

04.04.2014 16:24

The ongoing financial volatility in emerging economies is fueling debate about whether the so-called “Fragile Five” – Brazil, India, Indonesia, South Africa, and Turkey – should be viewed as victims of advanced countries’ monetary policies or victims of their own excessive integration into global financial markets. To answer that question requires examining their different policy responses to monetary expansion – and the different levels of risk that these responses have created.

Although all of the Fragile Five – identified based on their twin fiscal and current-account deficits, which make them particularly vulnerable to capital-flow volatility – have adopted some macroprudential measures since the global financial crisis, the mix of such policies, and their outcomes, has varied substantially. Whereas Brazil, India, and Indonesia have responded to surging inflows with new capital-account regulations, South Africa and Turkey have allowed capital to flow freely across their borders.

Consider Turkey’s response, which has been characterized by an unwavering commitment to capital-account openness. Though political developments in Turkey have been attracting the most attention lately, the country’s current crisis is rooted in economic weaknesses, reflected in declining investor confidence and the sharp depreciation of the lira’s exchange rate. This instability has raised fears of emerging-market contagion, with South Africa especially susceptible, owing to its capital-account openness.

In lieu of capital-flow restrictions, Turkey’s monetary authorities began to cut overnight borrowing rates in November 2010, in order to reduce the profitability of the carry trade (purchases of foreign-currency assets to take advantage of a higher interest rate). The hope was that longer-term capital flows would finance the widening current-account deficit, which exceeded 8% of GDP at the time, mitigating the risk of a sudden stop in external financing.

While many market observers applauded Turkey’s central bank for its bold, unorthodox policy mix, the International Monetary Fund criticized the Turkish authorities for increasing inflation expectations and fueling further credit growth. But the IMF did not explicitly recommend that Turkey employ capital-account regulations, despite the mounting evidence from its own staff that the introduction of such rules was working in many emerging markets’ favor.

Without capital-account management, Turkey’s central bank expected to achieve financial and price stability by complementing the reduction in overnight rates with domestic macroprudential tools aimed at reducing excessive credit growth. The main measures to control credit growth were a gradual increase in reserve requirements, beginning in 2010; some restrictions on consumer loans; and the introduction of credit-growth caps in the second half of 2011.

Officials argued that such tools are more effective than capital-flow measures, which “are, in general, hard to implement and rather easy to circumvent.” But domestic prudential measures could have only a limited effect on the rate of credit growth, because the growth was driven primarily by booming capital inflows.

Thus, domestic credit growth began to decelerate only in August 2011, when the escalation of the eurozone crisis made global investors more wary of risky emerging markets. Paradoxically, while Turkey’s monetary authorities acknowledged this relationship, they continued to attribute the decline in credit growth to the success of their prudential measures.

Then, last May, the US Federal Reserve announced its intention to begin to “taper” its multi-trillion-dollar asset-purchase program – so-called “quantitative easing” – triggering large-scale capital flight from emerging markets. There was no denying it: the emerging-market capital explosion was over, and the credit and asset bubbles that it had fueled were in danger of imploding.

By contrast, Brazil and India did not shy away from reimposing capital-account restrictions. Both economies are now far less fragile than Turkey and South Africa.

Given this, perhaps the real question is why Turkey refrained from using capital-account regulations, when almost all of its emerging-market counterparts were using them in some form. Was the financial sector too powerful for its policymakers? Were its central bankers too committed to the IMF’s previous view that inflation-targeting can work only under conditions of capital-account convertibility? Or was it because politicians benefited from the economic boost that inflows of short-term “hot money” provide, and thus were willing to ignore the consequences?

If there is a lesson to be learned from Turkey’s monetary-policy experiment, it is that domestic prudential regulations and monetary-policy tools should be viewed as complements to – not substitutes for – capital-account management. As for Turkey, its only hope to avoid an even deeper economic crisis is to take determined action to mitigate the economic risks that have been allowed to accrue over the last few years. Given the political instability that the country is currently facing, however, such an outcome is uncertain, at best.

Bilge Erten is a post-doctoral fellow at Columbia University’s Committee on Global Thought. José Antonio Ocampo, a professor at Columbia University, was Finance Minister of Colombia.

Copyright: Project Syndicate, 2014.


Váš názor
Na tomto místě můžete zahájit diskusi. Zatím nebyl zadán žádný názor. Do diskuse mohou přispívat pouze přihlášení uživatelé (Přihlásit). Pokud nemáte účet, na který byste se mohli přihlásit, registrujte se zde.
Aktuální komentáře
28.07.2021
17:59Summary: AMD se veze na vlně překotné poptávky po čipech
17:23Standardní cyklus a nestandardní Spojené státy
17:16Akcie před Fedem míří nahoru, koruně pomáhá vyhlídka vyšších sazeb  
16:02Analytik k výsledkům Alphabet: Reklama raketově roste a cloud zlepšuje profitabilitu  
15:34Gigafactory v ČR by mohla vyrobit baterie pro 400 až 800 tisíc aut ročně
15:19Tržby Pfizeru se díky prodeji vakcíny proti covidu-19 skoro zdvojnásobily
14:47Zákazníci se vrací do McDonald's, nebojí se vyšších cen a objednávají více
14:27Budoucnost Netflixu a velkých technologických firem
12:58iPhony dál ukazují sílu 5G cyklu, říká k výsledkům Applu analytik Ján Hladký  
12:49Viceguvernér ČNB Nidetzký je pro rychlejší zvyšování sazeb. Inflace už zatlačuje virus do pozadí
12:02Vládní dluh Česka rostl v úvodu roku po Kypru nejrychleji ze zemí EU
11:41Ján Hladký: Microsoft a kvartál splněných přání  
11:13Pozitivní dopoledne. Obavy z Číny ustupují, reakce na výsledky techů byla smíšená  
10:56Moneta zvedla kvartální zisk o 77 % a potvrdí jeho výhled pro celý rok, odhaduje analytik Patrie  
9:16Deutsche Bank má za sebou nejlepší kvartál od roku 2015
9:13Rozbřesk: Týden před jednáním ČNB zůstává koruna slabá. Forint dělá atraktivním proměna maďarské centrální banky
8:48Trhy čeká mírně růstový úvod. Po výsledcích Apple, Alphabet, Microsoft v Evropě Deutsche Bank nebo Glaxo  
8:28Čtvrtletní zisk Microsoftu stoupl téměř o polovinu, tržby překonaly očekávání
8:17Zisk i tržby majitele Googlu díky příjmům z reklamy stouply na rekord
7:58Apple téměř zdvojnásobil zisk především díky iPhonům

Související komentáře
Nejčtenější zprávy dne
Nejčtenější zprávy týdne
Nejdiskutovanější zprávy týdne
Kalendář událostí
ČasUdálost
Atos SE (06/21 Q2)
Banco Santander SA (06/21 Q2)
Boeing Co/The (06/21 Q2, Bef-mkt)
Bristol-Myers Squibb Co (06/21 Q2, Bef-mkt)
British American Tobacco PLC (03/21 Q1, Bef-mkt)
Carrefour SA (06/21 Q2, Aft-mkt)
Deutsche Bank AG (06/21 Q2)
Equinix Inc (06/21 Q2, Aft-mkt)
Facebook Inc (06/21 Q2, Aft-mkt)
General Dynamics Corp (06/21 Q2, Bef-mkt)
Lam Research Corp (06/21 Q4, Aft-mkt)
McDonald's Corp (06/21 Q2, Bef-mkt)
Moody's Corp (06/21 Q2, Bef-mkt)
PayPal Holdings Inc (06/21 Q2, Aft-mkt)
Pfizer Inc (06/21 Q2, Bef-mkt)
QUALCOMM Inc (06/21 Q3, Aft-mkt)
Rio Tinto PLC (06/21 Q2, Bef-mkt)
ServiceNow Inc (06/21 Q2, Aft-mkt)
Spotify Technology SA (06/21 Q2, Bef-mkt)
Vivendi SE (06/21 Q2, Aft-mkt)
XPO Logistics Inc (06/21 Q2, Aft-mkt)
7:00BASF SE (06/21 Q2)
8:00Barclays PLC (06/21 Q2)
8:00Wizz Air Holdings Plc (06/21 Q1)
13:00GlaxoSmithKline PLC (06/21 Q2)
14:30USA - Velkoobchodní zásoby, m/m
18:15Suez SA (06/21 Q2)
18:30Safran SA (06/21 Q2)
20:00USA - Jednání Fedu, základní sazba
22:05Ford Motor Co (06/21 Q2)
22:20Xilinx Inc (06/21 Q1)