Firms in Organized Industrial Zones (OIZs) deliver a better economic performance than other firms. OIZs are in a key position in terms of efficiency of targeted industrial and targeted financing policies through clustering.
If the cyclical effects ease and particularly, if global commodity prices converge to their long-term trends, the deficit observed in the headline current account balance may decrease significantly and even post a surplus.
Serdar Erkılıç,Hakan Hüsnü Toprak,Eda Altuntaş Dursun,Yahya Kocakale
This study gives a brief account of the scope and impact of the revisions to the statistics of Short Term External Debt, International Investment Position (IIP), Foreign Exchange Assets and Liabilities of Non-Financial Companies and Weekly Securities disseminated by the Central Bank of the Republic Turkey on 19 August 2021.
This blog post evaluates the results of the Cash Usage Habits Survey conducted by the Central Bank of the Republic of Türkiye in September-October 2020 to understand the cash usage habits in our country and to examine the importance of cash in payment methods.
In this study, we summarize our findings regarding the exporting potential of firms included in the Central Bank of the Republic of Turkey Sectoral Balance Sheet data-set, and the sector, size and provincial breakdown of non-exporting firms with high potential.
In this blog post, we classify the firms with the highest level of productivity as frontier firms and investigate the characteristics that distinguish these firms from other firms in terms of employment structure
Mustafa Akay,Doruk Küçüksaraç,Muhammed Hasan Yılmaz
FX derivatives are broadly used to reduce corporates’ exchange rate risk in emerging market economies. However, firms exhibit heterogeneity in terms of the use of derivatives. It will be beneficial to take this fact into account while designing regulations to encourage hedging.
The ITS statistics introduced by TurkStat are based on comprehensive micro-databases comprising administrative records and firms’ direct reporting. These statistics provide information at international standards in a breakdown by type of services and country.
The real exchange rate has a larger impact on imports than on exports, whereas aggregate demand is more likely to determine imports. Compared to previous periods, the effect of real exchange rate was more pronounced in the recent improvement of the external balance.
The existence of vacant jobs is an indicator of an important growth potential for economies. However, challenges in filling vacancies may restrain this potential. This blog post examines characteristics of these firms by using the Labor Market Surveys of the Turkish Employment Agency.
The indicator to be employed to set the buffer ratio should measure the sectoral stress accurately, be applicable at an international scale, and be simple, clear and rule-based, as those qualities are directly connected to the effectiveness and credibility of the CCyB.
The consistency of the productive capacity revealed in the form of foreign trade performance with the sectoral real effective exchange rate supports the interpretation of the decline in real effective exchange rate indices as competitive advantages. On the other hand, the strong medium-term relation between sectoral real effective exchange rate series and productivity points to the potential importance of productivity in the translation of nominal exchange rate advantages into international competitive advantages.
Venture capital and angel investment channels are particularly important instruments to boost direct investments of foreign investors in Turkey through international networks. Expansion of these methods is important in terms of their contribution to financial intermediation and their potential in providing high quality external financing.
The Fed started its balance sheet reduction program in the last quarter of 2017 and publicly announced its pace as well as its method. However, it did not make any commitment on the extent and deadline of this reduction. Following the recent slowdown in global growth, the Fed also suspended its policy normalization and announced that it would end the balance sheet reduction in September 2019 accordingly.In this note, we summarize that framework and evaluate its implications in terms of the balance sheet normalization.
The country of origin and the profile of inbound tourists as well as data on spending items that generate tourism revenue are key to analyzing tourism trends, identifying a target market and proposing better policies.
When the exchange rate effect is ignored, the fluctuation in the money supply may seem larger than it actually is in periods of substantial changes in exchange rates, producing misleading signals. Monitoring high-frequency money supply developments in both exchange rate-adjusted and non-exchange-rate-adjusted terms may be a better idea in economies with a high share of FX deposits in the money supply.
Approximately 6.1 billion TL worth of savings have been brought into the economy since the second quarter of 2016 as a result of policies towards increasing savings. Of this amount, 4.6 billion TL came from AES, 1.3 billion TL from gold-backed securities investments, and 175 million TL from housing and dowry accounts.
A considerable proportion of wage and salary employees in Turkey earn wages at and around the minimum wage, and minimum wage rates and the CPI serve as an anchor for wage increases in the private sector. This mechanism limits the sensitivity of wages to business cycles across the economy, leading to a significant rigidity in wage inflation and feeding into inflation rigidity in terms of the interaction between wages and inflation.
There is a noticeable extension in maturities of TL deposits since September. In the current financial setting, which has seen favorable implications of fading uncertainties and a macroeconomic rebalancing, the tax regulation made vis-à-vis withholding rates has contributed to the extension of deposit maturities as well as to curbing the dollarization.
The findings of our study underline that the conjunctural and structural policy framework to be developed to anchor inflation expectations is important in terms of lowering the borrowing costs and enhancing the effectiveness of monetary policy in emerging market countries.
In this blog post, we will examine the relationship between domestic sales and exports of manufacturing firms and how much this relationship is affected by domestic demand conditions. The results showed a pattern of substitution between domestic sales and exports of manufacturing firms.
Flexibility in labor markets should be handled with pros and cons. Even if low costs incurred by firms when meeting the labor demand from the free market is preferable in terms of the economy’s resilience against shocks, the cumulative effect to stem from rapid lay-offs on the economy should also be taken into consideration.
In this blog post, we aim to examine the domestic debt instrument preferences of investors in Turkey and compare them with some selected countries. Cross-country comparisons reveal that non-resident investors prefer long-term fixed-rate debt instruments. However, instrument preferences of other investors of the domestic debt stock vary across countries.
It is possible to say that the new tax law will stimulate US domestic demand and promote economic growth in the short run. Its medium and long-term impact will be determined by the supply-side effects.
Mehmet Zahid Samancıoğlu,Seyit Mümin Cilasun,Fatih Yılmaz
Firm investment rates have recently diverged in Turkey. Incentive policies should be designed in such a way as to aim for mechanization, particularly R&D-backed and high tech-based mechanization, in manufacturing industry in the long run, by taking into account differences in the breakdown of investments.
Industrial metal prices are determined by supply and demand factors in the medium and long term while financial conditions and the risk appetite have a decisive role in metal price movements in the short term.
Abdullah Kazdal,Süleyman Kutalmış Özcan,Muhammed Hasan Yılmaz
Product, activity and country-based diversification in the Turkish foreign trade witnessed a significant upswing in the last 15 years. On the other hand, diversification has come to a halt in recent years. In this context, steps to be taken to improve diversification in exports are considered vital.
Household indebtedness in Turkey is lower than in peer countries. However, it is of critical importance for a balanced growth that factors such as the propensity to save, financial stability, current account balance, and changes in the general price level are taken into account when managing this process.
With its labor quality, consumption pattern, demand power, technology skills, geographical location, infrastructure, business routine, and incentives, Turkey is a good alternative for both market-seeking and efficiency-seeking FDIs.
Yusuf Emre Akgündüz,Yusuf Kenan Bağır,Huzeyfe Torun,Altan Aldan
Recently, productivity gains have continued, while real wages have registered a decline. The impact of the changes in composition of employment and production structure is limited in these developments. The surge in productivity in the industrial sector is a favorable sign for inflation and growth dynamics.
The share of renewable energy in total supply was up around 12 percent from 2005 across the world in 2016. Turkey has a higher rate of renewable energy use than the OECD average but the rate of increase has proved far from satisfying.
Total portfolio inflows to emerging market economies are likely to decelerate in the upcoming period due to the Fed’s policy tightening. However, it appears that country-specific dynamics will be decisive in finding out who will get a larger share from the pie.
By being simple, transparent and easily accessible, prices on futures markets generally serve as a good starting point for forecasting oil prices, yet it is safe to say that forecasts made using a proper combination of different methods give more reasonable results.
Turkish manufacturing sector frontiers in terms of productivity are generally export-oriented large-scale firms with high turnover. These firms invest in technology and R&D. Laggards increase their productivity by learning from regional and national frontiers and/or by adapting the frontiers’ technologies according to their needs.
The pricing dynamics of core goods and services groups – the two main components of core inflation – are very different. For a sound analysis of core inflation, we should hear the tales of these two groups individually.
While a substantial number of firms had access to finance with the expansion of the Credit Guarantee Fund (KGF) facility, the majority of KGF guaranteed loans were used by corporates that were already borrowers of bank loans. Moreover, findings suggest that the KGF guarantee had significant implications in terms of credit costs and extension of maturities.
In 2017, banks expanded their deposit base on the one hand and used alternative funding sources on the other. In the upcoming period, continued diversification of funding sources will contribute to both financial deepening and the decline in funding costs.
Derivatives are not new to Turkish firms. They are already actively using derivative transactions, primarily swap, forwards and options. Moreover, the cost of forwards that are used by the corporate sector in managing the exchange rate risk is akin to banks’ costs.
The cost of raising the inflation target would most probably override its benefits. Moreover, although the likelihood of advanced country central banks hitting the zero lower bound problem is high, it will not be easy for them to abandon this policy that they have built up over a long time.
Oğuzhan Çepni,Doruk Küçüksaraç,Muhammed Hasan Yılmaz
The results of our analysis demonstrate that low government debt and adequate foreign exchange reserves positively affect the perception of sovereign risk in financial markets. In this respect, recent policy steps towards effective use of reserves are thought to be beneficial.
Projections based on World Trade Organization (WTO) data suggest that the uptrend in world trade volume will remain strong in 2018 and Turkey’s foreign trade partners will show a better growth performance than they did in 2017. These projections indicate that the momentum achieved in Turkey’s exports in 2017 will be sustained in 2018.
The Markets in Financial Instruments Directive II (MiFID II), which took effect on 3 January 2018, is intended to foster integration between EU financial markets, strengthen investor protection and improve transparency for all market players.
Our findings suggest that rediscount credits support exports. Yet, it should be underlined that a number of factors should be taken into account in the design of such financing instruments and the funds should be distributed in a target-oriented and efficient way.
The Data Gaps Initiative has made a significant contribution to countries in collecting and disseminating comparable, consistent and timely statistics. As for Turkey, there have been significant improvements in the statistics produced within the scope of the Initiative with respect to timing and content, and new statistics, such as sectoral accounts and real estate price indices, have started to be compiled and produced that will facilitate monitoring economic activity in Turkey.
It seems hard to decide whether the use of imported inputs is at an optimum by merely looking at figures or making cross-country comparisons. However, if we evaluate the use of imported inputs in a breakdown by sectors and in light of its change over time, the existence of some structural problems can be seen clearly.
There appears to be a correlation between the developments in the firms’ default probabilities calculated by the option pricing model and the NPL ratios. Therefore, it is considered that it may be helpful to use the corporate sector default probabilities in credit risk analyses and in the studies to be carried out to monitor the asset quality of the banking sector.
The borrowing preferences of the corporate sector are important in terms of financial stability. It is obvious that the FX loan utilization by firms with no FX income is very risky. FX loan costs, which are supposed to be low, may significantly exceed the TL loan costs depending on exchange rate developments.
In this study, the MFA-score, which measures the firm’s financial soundness with a high predictive power, was developed by using the balance sheet data of the real sector firms quoted on the BIST. As a result of our analysis, we found that distressed firms have a small share in terms of asset size, meanwhile, the firm debt and FX open position mostly concentrate in firms that are financially sound.
Producer prices are an indicator for capturing cost-side pressures on consumer prices. but the difference between the rates of increase in these series grows in favor of producer prices during periods of import cost shocks. Accordingly, it is natural that there was a divergence between D-PPI and CPI in 2017 when oil prices and exchange rates displayed significant movements.
In addition to being a long-term financial instrument for a country, these investments are important since they encourage the use of new technologies in production instead of old ones and thus urge an increase in productivity and the opening up of companies to new external markets.
Uğur Namık Küçük,İbrahim Ethem Güney,Doruk Küçüksaraç
The TL-Settled Forward Foreign Exchange Auctions are expected to support the corporate sector’s exchange rate risk management capacity by facilitating access to a simple, deep and efficient hedging instrument.
Misconduct can be a severe factor of fragility for financial institutions. Misconduct that increases particularly in periods of accelerated financial innovations not only causes damage to institutions but also leads to systemic risks by triggering a confidence crisis that may spread through the whole system through the contagion effect.
A country’s, particularly emerging countries’, performance in improving its institutional structure will be decisive in the economy’s potential to grow and benefit from international trade, regardless of an increase or weakening in the trend of protectionism in the world economy.
In September 2016 Banking Regulation and Supervision Agency introduced some amendments to macroprudential policy regulations. These changes had a favorable impact on the growth rates of housing loans and general-purpose loans, which played an important role in the recovery in the annual growth rate of total retail loans in the last quarter of 2016.
Even if firms’ decisions about exports are stable, it can be asserted that crises can lead to some dramatic changes in export behaviors of firms. In this context, it is very important to take into account the peculiarities of the period while determining incentives and measures to be introduced during economic fluctuations.
Muhammed İslami Önal,Mehmet Büyükkara,Zeynep Özge Yetkin
The Turkish banking sector does not experience any problems in implementing Basel III regulations thanks to its high capital adequacy level, strong risk management, effective supervisory and internal control systems, robust equity structure, high level of liquidity, low leverage level and deposit-based funding structure.
In addition to macroprudential policies implemented by policymakers in Turkey recently, the number of countries/banks that provide funds to the Turkish banking sector has also increased steadily, and regions outside the traditional financial centers have also become important sources of funds for the Turkish banking sector.
We assess that the growing transaction demand, the new bond issuances over the years and the maturity axis filled by the shifting maturities of previously issued bonds provide the adequate conditions necessary to form a healthy yield curve.
In Turkey, exogenous factors such as exchange rates and import prices have a significant impact on inflation. Estimates of pass-through from exchange rates and import prices to inflation allow us to make quite clear policy inferences as they contain no significant uncertainty. Nevertheless, pass-through from economic activity and wages to inflation contains a wider uncertainty band.
We observe that global liquidity has an impact on the magnitude of interest rate transmission. Yet, financial regulation is strengthened on a global scale and macroprudential policies are implemented in a broader spectrum, which may have weakened this impact.
The timely, targeted and temporary fiscal measures such as funding support and employment incentives have a high multiplier effect and a significant potential for creating tax revenues, which is expected to limit the impact of these measures on the budget deficit to some extent.
The Turkish Statistical Institution has recently made a revision in the national account system. Due to the revision, one of the most important differences between the series was in savings rates. However, the improvement observed in the savings rate in the aftermath of the national income revision does not eliminate the need for structural reforms in this area.
Due to Turkey’s prolonged EU membership process, which has lasted for over twenty years, and also due to a series of conjunctural and technical reasons, a need for an enhancement of the Customs Union has emerged in recent years.
Banks’ long-term borrowing tendency has strengthened due to the measures introduced. The change in the maturity composition of external debts in favor of the long term increases the sector’s resilience to liquidity shocks and supports financial stability.
Ahmet Adnan Eken,Mehmet Kasım Tırpan,Neslihan Tuba Kavruk,Başak Erdoğan
A developed and efficient government domestic debt securities (GDDS) market attracts foreign investors to Turkey. Actually, while GDDS held by non-residents has increased over time, the GDDS portfolio of non-residents has become an important item within the financial account of the balance of payments.
The methodological change in the weight structure of seasonal products is likely to cause fluctuations in core inflation via clothing and footwear prices. Therefore, in order to be able to make a healthy evaluation of the underlying trend of inflation, it would be wise to take into account the indicators adjusted for these effects for 2017 as it is a transition year.
Real wages do not have a significant elasticity for the low-wage group which accounts for approximately 25 percent of the workers in the Turkish economy. As for workers who earn more than the minimum wage, real wages are relatively more elastic.
Samet Kütük,Yavuz Selim Hacıhasanoğlu,Mahir Binici
In Turkey, we can assert that credit market developments mostly coincide with economic activity. Moreover, we find that the divergence between the duration of business cycles and credit cycles is not as severe as in other countries.
The NEO is affected by the foreign exchange legislation that changes over time, domestic economic developments, the course of the global economy, and the expectations and related behaviors of economic agents.
The NSFR, which will be effective starting from 2018, will enable comprehensive measurement of the liquidity risk by taking into account the maturity of the assets and liabilities on banks’ balance sheets.
The fact that the effectiveness of fiscal policy increases in low-growth periods enables the implementation of countercyclical expansionary fiscal policy without a lasting deterioration in fiscal discipline.
It is observed that central banks are willing to normalize their policies. Nevertheless, growth and employment developments worldwide, except for the USA, are not favorable enough to allow normalization at the moment.
Ali Hakan Kara,Fethi Öğünç,Çağrı Sarıkaya,Mustafa Utku Özmen
The degree of exchange rate pass-through to inflation may vary depending on the economic environment. Currently, the weak economic activity is limiting the exchange rate pass-through, whereas the behavior of exchange rate expectations pose upward risks.
Financial conditions, conceptually, summarizes whether financial indicators such as interest rates, exchange rates, asset prices and credit conditions are being restrictive or accommodative on economic activity.
Deposit maturities in Turkey are short and historically there has been a close relationship between the short term market rates –on which the CBRT has been decisive- and the Turkish lira deposit rates.
The Turkish lira liquidity demanded by banks from the Central Bank is determined according to the funding need of the system and the types of assets accepted as collateral for Turkish lira (TL) liquidity facilities of the CBRT do not determine the funding need of the system.
A holistic approach incorporating joint efforts of all stakeholders in the disinflation process can ease the policy trade-offs and thus make a significant contribution to achievement of lasting price stability at lower costs.
The total debt of resident sectors in Turkey is mostly driven by internal debts and its ratio to GDP has been on the decline since the third quarter of 2015, remaining at low levels compared to the selected countries.
In times of an elevated exchange rate risk, the demand for currency increases due to the hedging motive, which leads to a surge in both the level and the volatility in the currency swap market and the spot market.