Hakan Kara
@alihakankaraEng
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Former chief economist of the Central Bank of Turkey, now at Bilkent University. NYU Ph.D.
Joined November 2021
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Hesabım ele geçirilmeden önce paylaştığım son grafik buydu👇
Eğer Ekim ayında otomobil fiyat artışları endekse yansıtılsaydı Ekim’de TÜFE enflasyonu %20 psikolojik sınırı geçecekti.
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Yakın dönemde enflasyonu %20’nin altında tutmak için özel bir çaba gösterilmiş gibi görünüyor.
Eylül-Ekim aylarında kömür fiyatı iki ayda %72 artmış. Ancak katı yakıt endeks artışı %31'de kalmış!
(Not: Kömür fiyatı TÜFE'de katı yakıt fiyat endeksinin temel belirleyicisidir👇)
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Değerli arkadaşlar,
Sizlerin desteğiyle twitter hesabımı tekrar almayı başardık. Eskisini takip edebilirsiniz.
Hesap ismi değişmedi. Yeniden
@ali_hakan_kara
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Turkey's CDS has touched 800.
Assuming 0% recovery rate, this implies a 33% probability of default.
At 40% recovery rate (historical averages), the probability of default rises to 50%.
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Just a small correction. Total FX amount sold by the Central Bank of Turkey in December is roughly 17.6 billion USD as of today. The calculation below does not include yesterday's figures. An additional 3.1 billion seems to be sold yesterday.
@tashecon
@tashecon
Tim, I trust Haluk's computations. He calculates total interv. at 14.5 billion in December. Yet this does not include sales to BOTAS and purchases via export rediscounts, which are announced with a lag. Assuming the two cancel each other, 14-15 billion looks like a fair estimate.
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Turkey's CDS has touched to 900.
Assuming a 0% recovery rate, this implies a 36,2% probability of default.
At 35% recovery rate, the probability of default rises to 50%.
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Arkadaşlar
@ali_hakan_kara
hesabım açıldı. 24 saat dolmadan bu taarruzu püskürttük💪
Bu hesabı İngilizce tweetler için korumaya karar verdim. Dileyen ikisinde de kalabilir.
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Fair value does not exist in the absence of a systematic monetary policy response.
When markets don't like something, they throw a tantrum. That's what's happening with Turkish Lira, where markets are telling CBRT to stop easing. We think 15% is the terminal rate, so cuts are almost over, but it's best to do nothing Thursday & stop the panic. With
@UgrasUlkuIIF
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One of the charts I use in my lectures to explain why Turkey lost control of inflation and exchange rates in recent years.
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(sur)real policy rates in Turkey (red) compared to EM average (blue).
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Monetary policy uncertainty is at historical peaks in Turkey.
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Keep your interest rates at unrealistically low levels and sell your international reserves to defend your currency; you won't need the rest of the 6 steps.
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Return on Bitcoin is less impressive when adjusted for volatility.
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Değerli Arkadaşlar,
Dün hesabımı ele geçiren kullanıcıyı engellemiş olanlarınız bugün kurtardığımız
@ali_hakan_kara
hesabımı göremeyebilirler. Engeli kaldırırlarsa sorunun çözüleceğini tahmin ediyorum.
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Since 2018, Turkish firms' net FX open position has partly shifted to the public sector. Hence the immediate impact of recent Lira fall is not as destructive as it used to be.
Meanwhile, adverse impacts through public sector position (via inflation & taxes) will come with a lag.
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Turkish FX intervention and TL/$ exchange rate.
Readily accessible at:
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I agree that recent TL weakness will compress imports, but this time expectations of higher inflation will lead to a stronger demand for imports, limiting the compression. A sizeable adjustment is likely to come only with a recession.
Turkey is suffering a large devaluation. The typical episode of this sort involves a 30% drop in imports. Turkey in 18Q3 was 20%, Argentina much more. We'll see a lot of import compression, which will eventually be positive for the currency.
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POWEL: WE HAVE A GOOD CHANCE TO HAVE A SOFT, SOFT-ISH LANDING.
Translation: PREPARE FOR A MILD RECESSION.
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Financial Times article incorporating my views on the challenges awaiting the new Turkish Central Bank Governor.
…
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Vulnerability of the countries against US policy tightening and China slowdown.
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In a high inflation environment, I would expect "fair value" of nominal exchange rate (if it ever exists) to be a continuously increasing function rather than a step function.
We're publishing updated FX fair values this week. As part of that exercise, we lift our Turkish Lira fair value from $/TRY 16.50 to 21.00 given the sharp widening in the current account deficit. Our fair value was $/TRY 5.50 in 2020 before the COVID pandemic. With
@UgrasUlkuIIF
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@ali_hakan_kara
hesabımı sizlerin desteğiyle geri aldık 💪Bazılarınızda hala bloklu görünüyor. Engellemeyi kaldırabilirsiniz.
Bu satırları okuduğunuz hesabı ise bir süre sonra İngilizce tweetler için kullanacağım.
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Turkey tops the list in real house price inflation.
Source: WB Turkey Economic Monitor.
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MSCI Turkey relative to emerging markets has been on a declining trend since 2013 taper-tantrum.
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Foreigners’ net TL-long swap positions for the first time turned negative in November.
This is not only due to quantity restrictions by the authorities but also reflects historically low appetite to take TL risk by foreigners.
Source:
@BurumcekciRC
Have a nice day!
Check out the headlines from today’s Morning Briefing.
For detailed information and inquiries:
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And here is the outcome..
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The literature shows a strong relationship between monetary policy predictability and inflation.
Source: IMF WEO
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This is a typical example of how "skilful" the governments can be in shifting today's problems to the future.
It may be a coincidence or not, but looks like a clever move from a political economy perspective in a society where the majority has limited financial literacy.
Since 2018, Turkish firms' net FX open position has partly shifted to the public sector. Hence the immediate impact of recent Lira fall is not as destructive as it used to be.
Meanwhile, adverse impacts through public sector position (via inflation & taxes) will come with a lag.
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Yakın dönemde enflasyonu %20’nin altında tutmak için özel bir çaba gösterilmiş gibi görünüyor.
Eylül-Ekim aylarında kömür fiyatı iki ayda %72 artmış. Ancak katı yakıt endeks artışı %31'de kalmış!
(Not: Kömür fiyatı TÜFE'de katı yakıt fiyat endeksinin temel belirleyicisidir👇)
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Global inflation surprise index remains at unprecedently elevated levels.
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A historical moment where, in an inflation chart, you can see US shaded with a deeper red than Turkey.
Core inflationary pressures have increased to different extents across countries as seen in this heat map. The deep reds are where the pressures are most severe. The implications for monetary policy are discussed in my blog with Tobias Adrian
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"Monetary policy is a blunt tool for redistribution or insurance. HANK models tell us that fiscal policy is likely better suited for this task because it can be targeted more precisely to those in need of support."
How new economic models can help policymakers better understand the effects of their inflation-taming measures, in F&D.
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The fact that Turkey still has one of the highest current account deficits despite the massive real FX depreciation, suggests that financial conditions have been extremely loose in recent years.
Weakest currencies around the world
(Jun 2012 - Jun 2022, in %)
1. Turkish Lira: -50%
2. Japanese Yen: -42%
3. Colombian Peso: -39%
4. Brazilian Real: -30%
5. Hungarian Forint: -23%
6. Norwegian Krone: -20%
7. Swedish Krona: -19%
8. Chilean Peso: -18%
9. South African Rand: -16%
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Fair point. Curve inversion is useful to predict recessions when market indeed expects a recession-driven disinflation. Currently, it may be the expectation of rapidly waning supply-side factors that drives the curve inversion in US.
Yield curve inversion as predictor of recession has failed. 10-year Treasury yield (orange) fell below the federal funds rate (white) in 2019, much as it fell below the funds rate in 2022. In neither case did recession happen. Time to send the inversion signal into retirement...
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An oil price surge used to worsen the US terms of trade (ToT) in the 70s. Nowadays, high oil price means a positive ToT shock, which fundamentally supports appreciation of the USD and improves policy tradeoffs - reducing the need to create a deep recession to stabilize inflation.
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100 years of central bank independence and inflation in Latin America.
Source: Jácome and Pienknagura (2022)
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I will give a keynote talk on inflation expectations at the Turkish Economic Association Conference today at 10 am.
Live you tube link:
🛎Keynote Speaker - I
💬Prof. Dr. Hakan Kara
🗓 1 Eylül 2022 / Perşembe
🕰 10:00
🔗
@ali_hakan_kara
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Pandemic can longer be used as an excuse for the bulk of US inflation.
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Despite the rapid population growth, real agricultural commodity prices have been on a downward trend during the past century.
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FT article incorporating my views on today’s monetary policy decision of the Turkish Central Bank.
Summary: there are times when actions should speak louder than words.
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Past pandemics were deflationary, unlike the current one. One wonders what portion of this difference can be explained by the sophistication of global supply chains vs the macro policy response.
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5000 years of world interest rates.
Source for the chart:
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In this excellent speech Ms. Schnabel notes that "When the degree of inflation persistence is uncertain, optimal policy prescribes a forceful response to a deviation of inflation from the target..."
Exactly in line with my research published 20 years ago.
The risk of high inflation becoming entrenched in expectations is high, says Executive Board member
@Isabel_Schnabel
at
@KansasCityFed
’s
#JacksonHole2022
. To reduce this risk, central banks must act forcefully to bring inflation back to target quickly
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If implemented, this may partly alleviate Turkey’s energy-related BOP concerns.
Turkey’s Rubles-for-gas scheme may be drastically different from Europe’s.
We show that Turkey will likely receive a credit line from a Russian bank in Rubles, and use this to pay for the gas.
Here is how the mechanism may look like:
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@AhmetBeyefendi
@tashecon
Açık pozisyon üzerinden hesaplayınca 0.5 görünüyor ama bu yöntem hatalı sonuçlar verebiliyor. Net döviz rezervi üzerinden hazine itfaları vs dahil edilerek yapılan ince işçilikle 22'sinde 3.1 milyar çıkıyor. Bu yöntem daha sağlıklı.
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Decent central bank communication. Mentioning the potential impact of weak euro on inflation would help justify why rate hikes may be needed in the Euro area despite the weakening demand.
In my speech
@ForoLaToja
in beautiful Galicia I talked about “Monetary policy in a cost-of-living crisis” and had an interesting panel discussion about inflation with my former colleague Carlos Costa and with Antón Costas
@CESEspana
, moderated by Alejandra Kindelán
@Aebanca
. 1/15
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Turkey launched a rate cut cycle in 2021, while all the others were tightening policies during the post-pandemic inflation.
Our study in this
@cepr_org
eBook assesses the outcomes, lessons and policy implications of this unique experiment.
📢 New CEPR eBook 📢
'Monetary Policy Responses to the Post-Pandemic
#Inflation
'
Edited by Bill English
@YaleSOM
,
@KristinJForbes
@MITSloan
,
@AngelUbide
@Citadel
Free to Download 👉
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Is Argentina trying the Turkish monetary policy experiment?
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@maattar
@FGulcin_Ozkan
@timurkuran
@TimGur1
@rodrikdani
@ProfUfukAkcigit
@ErhanAslanoglu
@DrUlucan
@HakanMIHCI8
@Talha_Yalta
@yasinarslantas0
@Yasemin_Yalta
@ErincYeldan
@evoyvoda
@merdogul
Aykut Hocam, güzel sorular ama hangi kategoride olduğumu kestiremediğim için yanıtlayamadım :)
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“Anything the crypto can do, the CBDC can do better” says BIS.
Retail
#CBDCs
can be designed with inclusive features to serve users that currently do not have access to digital payments
#BISAnnualEconReport
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@emeyersson
I wonder how they can differentiate “sentiment” from monetary policy in the current context.
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@RobinBrooksIIF
Maybe we should dig into the shorter-end. 5 year may be a long period for the life time of supply shocks.
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@akcakmak
Very useful thread. Do we have a case in which real policy rate stayed at deeply negative levels even after the currency shock?
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@elerianm
What may be even worse is that this is accompanied by a substantial divergence in wealth distribution.
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@emeyersson
Even if the weight is small, the discrepancy between coal price and the associated index in the CPI is significant. I calculate the contribution of this "quality adjustment" to CPI at about 25 basis points in the past two months. Just enough to bring inflation below 20%.
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@Hypermelony7
Think about the implied probability of crashing your car given the fixed car insurance premium. Would this probability be higher or lower if you could recover 35% of the car's value after the crash compared to 0% recovery?
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@akcakmak
Real interest rates matter for residents and nonresidents watch residents.
Transitivity :)
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@IbrahimUnalm
That is right. We keep using those “great moderation” models. And if there is a structural shift, the “shock” is not equivalent to “surprise” anymore.
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@MarkTho79704209
@AhmetBeyefendi
Well put. The degree of indexation depends on the level of inflation and the credibility of the monetary regime.
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@BarisKilickaya
@ali_hakan_kara
@iktisada
@RobinBrooksIIF
Loans are FX valuation adjusted, which makes it difficult to read the picture.
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@AntonioLuisRoja
@ali_hakan_kara
Diğer hesap tam oturana kadar ikisini de kullanacağım.
Bir süre sonra bunu sadece İngilizce tweetler için kullanacağım.
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@LucaFornaro3
Very useful piece, thank you for sharing. One quick reaction: In practice, isn’t it very likely that when a country implements monetary leasing, demand for T goods may rise faster than supply?
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@LucaFornaro3
Very useful thread. IMHO the question seems to be more related to model uncertainty (how investment and technology is related to monetary policy) rather than CB preferences.
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@rodrikdani
Encouraging top academic journals to give more credit to imperfectly identified but big/important research questions may solve the problem but implementing this in practice may be quite challenging.
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@gundesbakir
@ali_hakan_kara
Pelin Hocam, dün hesabımı ele geçiren hesabı engellediyseniz ulaşamayabilirsiniz. Engeli kaldırıp tekrar deneyebilir misiniz?
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@guido_lorenzoni
@IvanWerning
Good idea 👍 Perhaps we should randomize on the first paper but alternate thereafter (assuming same set of coauthors).
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