What drives dollarization in Turkey?

This paper provides an analysis on the source of dollarization in Turkey by constructing measures for asset, liability and offshore dollarization. In doing so, the study seeks a co-integration relationship among these variables. Results suggest that rising asset dollarization was mainly demand-driven originating from increasing demand for foreign assets before the 2001 financial crisis. The increasing demand for foreign assets in turn resulted in an increase in foreign currency-denominated debt thus causing an increase in liability dollarization. However, this story changed radically after the crisis. The post-crisis period witnessed externally driven dollarization albeit at a decreasing rate. Increasing external funding opportunities for the banking system produced an increase in offshore dollarization, which eventually fed into higher asset dollarization than otherwise would have occurred. Thus, the empirical evidence suggests that if it were not for the increasing rate of offshore dollarization, asset dollarization would have been lower. The evidence also suggests that the strong fight against inflation under the Inflation Targeting framework led to lower asset dollarization through lower inflation and a more stable exchange rate; however the resulting interest rate differentials and decreased currency risk also motivated more external funding thus leading to higher offshore dollarization

Dedollarization in Turkey after decades of dollarization: A myth or reality?

The paper analyzes dollarization in the Turkish economy given the evidence on dedollarization signals. On conducting a Vector Autoregression (VAR) model, the empirical evidence suggests that dollarization has mostly been shaped by macroeconomic imbalances as measured by exchange rate depreciation volatility, inflation volatility and expectations. Furthermore, the generalized impulse response function (IRF) analysis, in addition to the analysis of variance decomposition (VDC) gives support to the notion that dollarization seems to sustain its persistent nature, thus hysteresis still prevails. Hence, unfavorable macroeconomic conditions apparently contribute to dollarization while dollarization itself contains inertia. Furthermore, dedollarization that presumably started after 2001 has lost headway after May 2006. Thus, it seems too early to conclude that dollarization changed its route to dedollarization. © 2007 Elsevier B.V. All rights reserved

An alternative method to measure the likelihood of a financial crisis in an emerging market

This paper utilizes an early warning system in order to measure the likelihood of a financial crisis in an emerging market economy. We introduce a methodology, where we can both obtain a likelihood series and analyze the time-varying effects of several macroeconomic variables on this likelihood. Since the issue is analyzed in a non-linear state space framework, the extended Kalman filter emerges as the optimal estimation algorithm. Taking the Turkish economy as our laboratory, the results indicate that both the derived likelihood measure and the estimated time-varying parameters are meaningful and can successfully explain the path that the Turkish economy had followed between 2000 and 2006. The estimated parameters also suggest that overvalued domestic currency, current account deficit and the increase in the default risk increase the likelihood of having an economic crisis in the economy. Overall, the findings in this paper suggest that the estimation methodology introduced in this paper can also be applied to other emerging market economies as well. © 2007 Elsevier B.V. All rights reserved

A short and efficient construction of the dibenzo[c,h]chromen-6-one skeleton

We hereby report a major revision of the synthetic methodology for construction of the dibenzochromenone skeleton. Homophthalic acid derivatives were reacted with thionylchloride/DMF in the presence of NaN3. As the main product, dibenzochromenone derivatives were obtained. When the reaction was performed in the absence of NaN3, only isochromenones were formed. The mechanism of the formation of these products is discussed.Turkiye Bilimsel ve Teknolojik Arastirma Kurumu (TUBITAK) (108-M168); Department of Chemistry at Middle East Technical University; Turkish Academy of SciencesPublisher's Versio

The impact of the liberalization program on the price-cost margin and investment of Turkey's manufacturing sector after 1980

In this paper, we investigate the structural consequences of the post-1980 outward-orientation on the market concentration and accumulation patterns in the Turkish manufacturing industries. Using various panel data procedures over twenty-nine subsectors of Turkish manufacturing for the 1980-1996 period, we focus on three sets of issues: (1) the effect of openness on the extent of market concentration as measured in CR4 ratios; (2) the behavior of gross profit margins (markups) in relation to openness, concentration ratios, and real wage costs; and (3) the behavior of sectoral real investments (by destination) in relation to the profit margins, real wage costs, and the openness indicator. Our results suggest very little structural change in the sectoral composition and nature of market concentration and behavior of profit margins under the post-1980 structural adjustment reforms and outward-orientation. We find that, contrary to expectations, "openness" had very little impact, if any, on profit margins (markups), and, within manufacturing, the trade-adjusting sectors reveal a positive relationship between the profit margins and openness. Profit margins are found to be positively and significantly related to concen- © 2002 M.E. Sharpe, Inc. All rights reserved

Real wages, profit margins and inflation in Turkish manufacturing under post-liberalization

This article reports investigations into the behaviour of gross profit margins (mark-ups) in Turkish manufacturing industries for the post-1980 liberalization period in relation to price inflation, trade liberalization (openness) and real wage costs. Panel data econometrics over 29 subsectors of Turkish manufacturing are used over the period 1980-1996. Results suggest that profit margins are positively and significantly related both to price inflation and real wage costs. However, openness is found to have very little impact on profit margins.

The dynamics of a newly floating exchange rate: the Turkish case

In recent years, many emerging market economies have switched or are in the process of switching to a floating exchange rate regime. Most of these economies have a history of high inflation and a high level of foreign currency denominated debt. Therefore, the stability of the exchange rate and the dynamics of its volatility are more crucial than before. This paper analyses the dynamics of exchange rate in Turkey in the aftermath of recent float in February 2001. The Turkish experience is a particularly important one, and provides valuable lessons for other countries as the Central Bank is trying to simultaneously contain the volatility of exchange rate and pursue an implicit inflation targeting policy. The reported findings indicate that the Central Bank policies, accompanied with favourable external factors, were effective in taming the volatility of the exchange rate in a relatively short period of time. However, there is a significant real appreciation of the currency during the same period. Given the high level of public debt and real interest rates, the current state of the economy is very susceptible to any adverse shocks.

Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing

In this paper we investigate the distributional consequences of the post-1980 accumulation patterns and technological change in the Turkish manufacturing industries. We utilise two quantitative techniques. First, we make use of the Hodrick-Prescott filter to disintegrate the cyclical variations in productivity growth and wage rates from their respective historical trends, and study the evolution of the wage cycle against the long term productivity patterns in the sector. Next, we decompose the fundamental characteristics of the contributions of productivity growth of the manufacturing sub-sectors to the overall total. Our results suggest very little structural change in the sectoral composition and nature of productivity advances under the post-1980 structural adjustment reforms and outward-orientation, and underscore that the gains in productivity in this period did not materialise as gains in remunerations of wage labour. Contrary to the prognostications of the orthodox theory, the post-1980 export orientation of Turkish manufacturing was not found to lend itself to productivity contributions, and could not be sustained as a viable strategy of 'export-led industrialisation'.