Turkish economic association international conference on economics

AKBOSTANCI, Elif (Middle East Technical University)

ÖZŞUCA, Ekin Ayşe (Middle East Technical University; Çankaya University)
Optimal Monetary Policy under Sectoral Heterogeneity in Inflation Persistence

ALP, Sevim Kösem (Central Bank of Turkey)

ERDOĞDU, Oya S. (Ankara University)

ÖZLÜ, Pınar (Central Bank of Turkey)

YALÇIN, Cihan (World Bank)

03.09.2010 14:00-16:00 Workshop 7

Seçilmiş Oturum 43 - Sektörel Analizler: Türkiye Örneği II

Oturum Başkanı: ERAKTAN, Gülcan
Küresel Ekonomik Kriz Sürecinde ve Sonrasında Türkiye’de Tarım Sektörünün Görünümü

DELLAL, İlkay (Ankara Üniversitesi)

ERAKTAN, Selahattin (Ankara Üniversitesi)

CEYLAN, Coşkun (Ankara Üniversitesi)

KESKİN, Gülşen (Tarımsal Ekonomi Araştırma Enstitüsü)
Türkiye’de Tarımsal Verimliliğin Belirleyenleri

GÖKOVALI, Ümmühan (Muğla Üniversitesi)

ŞENTÜRK, Bilge (Muğla Üniversitesi)
Tekstil ve Hazır Giyim Sektöründe Markalaşma ve İhracat performansı İlişkisi: Denizli Örneği

GÖKOVALI, Ümmühan (Muğla Üniversitesi)

TERZİOĞLU, Mustafa (Muğla Üniversitesi)
Türkiye İmalat Sanayiin İthalat Yapısı

SAYGILI, Şeref (Türkiye Cumhuriyet Merkez Bankası)

CİHAN, Cengiz (Türkiye Cumhuriyet Merkez Bankası)

YALÇIN, Cihan (Türkiye Cumhuriyet Merkez Bankası)

HAMSİCİ, Türknur (Türkiye Cumhuriyet Merkez Bankası)

03.09.2010 16:30-18:30 Discuss

Invited Session - Business Cycle, Productivity, Trade, and Investment

Business Cycles and Corruption

GÖKÇEKUŞ, Ömer (Seton Hall University)

SUZUKI, Yui (Seton Hall University)
Measuring World Productivity

FETHİ, Meryem Duygun (University of Leicester)

HAO, Jiaqi (Rice University)

ISAKSSON, Anders (UNIDO)

SICKLES, Robin C. (Rice University)
A Power through Trade? The European Union and Democracy Promotion in ACP States

NOTTEBAUM, Dennis (University of Münster)

GÜNGÖR, Hasan (Eastern Mediterranean University)

BALCILAR, Mehmet (Eastern Mediterranean University)

ÇİFTÇİOĞLU, Serhan (Eastern Mediterranean University)

ALTUN, Ayşen (Dumlupınar University)

ATALAY, Ceren Giderler (Dumlupınar University)
Technological Convergence as a Rationale for Mergers

KARAASLAN, Mehmet Emin (Işık University)

ŞAHİN, Serçin (Yıldız Technical University)

DONDURAN, Murat (Yıldız Technical University)
R&D Activities, Innovation and Efficiency of R&D Process: A Case of Turkey

TÖNGÜR, Ünal (Middle East Technical University)

ÇAVUŞ, Salim (Marmara University)

KARAKAŞ, Derya Gültekin (Istanbul Technical University)
Lifting the Veil on Islamic Banking: A Comparative Analysis between the Commercial and Islamic Banks in Turkey

DEMİRALP, Selva (Koç University)

DEMİRALP, Seda (Işık University)
Mergers and Acquisitions in Turkish Banking Industry: An Empirical Investigation

DONDURAN, Murat (Yıldız Technical University)

GANİOĞLU, Aytül (Central Bank of Turkey)

MORO, Beniamino (University of Cagliari)

ÇANAKÇI, Demet (Central Bank of Turkey)

GAZİOĞLU, Şaziye (Middle East Technical University)

BAŞDAŞ, Ülkem (Middle East Technical University)
Real Business Cycles in Turkey?

TAŞTAN, Hüseyin (Yıldız Technical University)

AZER, Özlem Arzu (Arel Üniversitesi)

HAVA, Hüseyin Tamer (Türk Hava Kuvvetleri)
Küresel Finansal Krizden Alınan Dersler: Denetim Üçlemesi

BOZKUŞ, Sezer (KPMG)

KAHYAOĞLU, Hakan (Dokuz Eylül Üniversitesi)

UTKULU, Utku (Dokuz Eylül Üniversitesi)
Krizler, Ekonomik İyileşme ve Dış Ticaret Gelişmeleri: 1994, 2001 ve 2008 Krizlerinin Türkiye Ekonomisindeki Etkileri Üzerine Karşılaştırmalı Bir Analiz

ÜZÜMCÜ, Adem (Kafkas Üniversitesi)

AOKI, Masahiko (Stanford University; President, International Economic Association)

This year Japan and China are competing for the position of the second largest economy in terms of GNP. Usually discussions of national competitiveness and the global “imbalance” focus on the substitutability of tradable goods produced by different economies. This speech instead focuses on possible complementarities between what the two economies can offer to each other’s national economic agenda. It discusses implications of different phases of demographic change of the two economies to the sustainable growth of per capita income (net of external social costs).

1 Eylül, Çarşamba Wednesday, September 1

Plenary Session Academia

Liquidity Booms and Busts
CALVO, Guillermo (Columbia University; Former President, International Economic Association)
gc2286@columbia.edu>
The lecture will start by asking whether standard fundamentals are no longer critical for making more or less likely that an economy undergoes financial crisis. The relevance of the question will be illustrated by reference to the 1998 Russian crisis and the collapse of Lehman Brothers, ten years after. The lecture will then move on to discuss a factor that has been largely ignored in mainstream macroeconomic models as a major cause of disturbances, namely, liquidity. It will be argued that liquidity should be included in the set of fundamentals, and that it may help to further understand the mechanics of financial crises. In the run up to the subprime crisis, for example, liquid assets were created by the private sector through mortgages’ securitization. These instruments and associated financial derivatives have been a major factor behind the ensuing crisis. It will be shown, in the context of a simple model, that liquidity creation and destruction have the potential of generating bubbles and contributing to their demise. The model will be used to study the effects of monetary policy. It will be shown that low policy interest rates may contribute to the generation of price bubbles and to the creation of new liquid private sector assets – and that liquidity booms and busts are bound to have severe effects on the credit market, e.g., Sudden Stops. The lecture will be closed with some remarks about inter alia the pros and cons of a global central bank, IMF and Fed liquidity facilities and swaps – and the role of controls on capital flows and reserve accumulation to lower the probability of unsustainable bubbles in emerging market economies.

1 Eylül, Çarşamba Wednesday, September 1

Invited Lecture Discuss

The Distributional Consequences of Foreign Transfers: Do they Reduce or Exacerbate Inequality?
BOUZA-TEKİN, Serpil (University of Washington)

TURNOVSKY, Stephen J. (University of Washington)

This paper studies the impact of foreign transfers on the recipient country’s aggregate economic performance, as well as its distribution of wealth and income, within a dynamic two-sector dependent economy framework. The transfers may take the form of a pure flow of resources, devoted to debt reduction, or alternatively they may be allocated to the productivity enhancement of the traded or nontraded sector, via investment in the sector’s infrastructure. The effect of the transfer on aggregate economic performance depends crucially upon: (i) the relative capital intensities of the two productive sectors, and (ii) the allocation of the transfers across the sectors. The consequences for wealth and income inequality depend not only upon these two factors, but also upon (iii) the economy’s access to the world financial market. Most of the analysis is conducted using numerical simulations, where we characterize the dynamic evolution of both the aggregate economy and wealth/income inequality. Whether growth and inequality are positively or negatively associated over time depends upon the three factors noted above. In this regard, the analysis can be reconciled with the contrasting range of empirical evidence.

1 Eylül, Çarşamba Wednesday, September 1

Invited Lecture Discuss

Innovation, Technological Change and Europe 2020

PAGANETTO, Luigi (University of Rome “Tor Vergata”; Secretary General, International Economic Association)

The R&D investment in innovation is the most common mode to measure innovating activity of firms. The European Innovation Scoreboard (2009) recognize, nevertheless, that R&D investment is not the only method of innovating; creativity and design are also considered important.

KÖSE, Ayhan (International Monetary Fund)

This paper provides a comprehensive analysis of financial cycles using a large database of more than 750 financial cycles in 21 advanced countries over the period 1960:1-2009:4. Specifically, we analyze cycles in credit, house prices, equity prices, and exchange rates. We report three main results. First, financial cycles tend to be long and severe, especially cycles in housing and equity markets. Second, financial cycles are highly synchronized within countries, particularly credit and house price cycles. The extent of synchronization of financial cycles across countries is high, mainly in the case of credit and equity cycles, and has been increasing over time. Third, financial cycles feed off of each other and become amplified, especially during downturns of credit and housing markets. Moreover, globally synchronized downturns tend to be associated with prolonged and more costly episodes, especially in the case of credit and equity cycles. In light of these findings, we examine the duration and amplitude of financial disruptions of the past two years.

1 Eylül, Çarşamba Wednesday, September 1

Invited Session-Financial Cycles and Central Bank Communication Consensus

The High-Frequency Response of Exchange Rates to Monetary Policy Actions and Statements

ROSA, Carlo (University of Essex; CORE)

This paper investigates the impact of U.S. monetary policy on the level and volatility of exchange rates using an event study with intraday data for five currencies (the U.S. dollar exchange rate versus the euro, the Canadian dollar, the British pound, the Swiss franc, and the Japanese yen).

I construct two indicators of news about monetary policy stemming separately from policy decisions and from balance of risk statements. Estimation results show that both policy decisions and communication have economically large and highly significant effects on the exchange rates, with the surprise component of statements accounting for most of the explainable variation in exchange rate returns in response to monetary policy. This paper also shows that exchange rates tend to absorb FOMC monetary surprises within 30-40 minutes from the announcement release.

DEMİRALP, Selva (Koç University)

KARA, Hakan (Central Bank of Turkey)

ÖZLÜ, Pınar (Central Bank of Turkey)

Since the early 1990s, the conduct of monetary policy has shifted all across the globe from secrecy towards more transparency. The main reason behind this global trend was the increasing understanding that transparency can improve the effectiveness of policy (see Woodford, 2003). Nowadays, most central banks use short-term interest rates as their main operational instrument. However, short-term rates hardly matter for the broader objectives of the central banks such as future inflation or economic activity. Communication emerges as a natural bridge in this respect, which enables central banks to steer private sector expectations about their future actions and determine the entire path of the yield curve. In turn, long-term rates affect private sector consumption and investment decisions.

Following the rising role of communication in central banking, the academic literature explored this topic extensively over the last fifteen years (see Blinder et al., forthcoming, and the references therein). Central bank communication takes two main forms. The first one is communication through policy announcements that are released after monetary policy committee meetings (which are generally scheduled based on a pre-determined calendar) and the second one is communication during the inter-meeting period through speeches by the committee members or releases of periodic reports. While the majority of the literature focused on central bank communication during the intermeeting period (see e.g. Ehrmann and Fratzcher, 2007a, 2007b; Reeves and Sawicki, 2007; Rozkurt et al., 2007; central bank communication via policy decision announcements has also been investigated (see e.g. Kohn and Sack, 2004; Rozkurt et al., 2007). The primary reason for the uneven distribution of these studies between those that focus on the inter-meeting period versus those that study announcements after policy meetings is the difficulty in quantifying policy statements. For this reason, even those studies that study policy statements after meetings (cited above) refrain from extracting the intention of the policy statements. Instead of analyzing whether markets respond in accordance with the directional intent of a statement, these studies focus on the impact of these statements on the volatility of financial variables.

The Central Bank of Turkey (CBT) began implementing “implicit inflation targeting” in 2002. Full-fledged inflation targeting policy was adopted at the beginning of 2006. The inflation report and the minutes of the Monetary Policy Committee (MPC) Meetings became main tools of monetary policy communication. CBT’s announcement of the policy objectives and assessment of the economic conditions are now closely monitored by the market-participants. During the period from 2001 through 2004, the policy decision dates were not pre-announced: Decisions on short-term interest rates were taken on any business-day. The monetary policy decision-making processes became more institutionalized and transparent during the 2005-2006 period. Meeting dates of the MPC are announced to the public in advance since 2005.

This paper attempts to quantify the communication of monetary policy regarding future policy rates and to evaluate the impact of the communication on the yield curve. The study contributes to the growing literature on central bank communication in an important way by quantifying the information embedded in policy statements released after the rate decisions. Assigning a direction to each statement is crucial because it enables us to evaluate whether the markets moved in the “right” direction following the statement as opposed to simply checking whether the markets responded in one way or another. In this respect, we construct a unique database of the CBT’s written statements. The statements include policy statements that accompany interest rate decisions.

Clearly, there are other forms of written or verbal communication tools available such as monthly inflation reports and monthly price developments reports or speeches by the governor. However, we restrict our attention to those written statements that accompany policy decisions. Quantifying the information content of such statements is clearly subjective. Our focus is to evaluate the relative success of the central bank in transmitting its intended signal. Therefore, at the first stage the statements are evaluated by experts at CBT. Dummy variables are created based on the information content of each statement, depending on the change in the policy stance as implied by the announcements, as well as the strength of the policy bias. At the second stage, we test how well these signals are received by market participants.

Our paper is the first study that evaluates the relative efficiency of central bank policy statements. We examine whether central bank communication affects expectations of future decisions in the desired direction via its repercussions on the yield curve. We also investigate to what extent the predictability of monetary policy decisions has been influenced by central bank communication.

DEĞİRMENCİ, Serkan (Istanbul Technical University) sdegirmenci@itu.edu.tr