OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
Tackling Turkey’s External and Domestic Macroeconomic Imbalances
Effective macroeconomic and structural policies helped Turkey bounce back quickly and strongly from the global crisis, with annual growth averaging close to 9% over 2010-11. However, the current account deficit widened to around 10% of GDP in 2011 and consumer price inflation rose to over 10%. The external deficit, which is far too large for comfort, is a source of vulnerability. So is high inflation, even if it partly reflects transient factors. These imbalances signal competitiveness problems and a dearth of domestic saving. They need to be addressed using both macroeconomic and structural policy levers. Monetary policy has recently tried to reduce the volatility of capital flows but inflation has been high and volatile. The inflation target needs to be given greater prominence. The fiscal stance remains broadly appropriate but could be tighter, if warranted, to complement monetary restraint and help keep the real exchange rate on a sustainable path. More balanced growth through strengthened competitiveness and greater private saving calls inter alia for increased labour force participation, accelerated formalisation, stronger productivity growth, improvements in financial literacy and a more attractive menu of saving instruments. Improvements in the business environment would spur foreign direct investment, making for healthier funding of the external gap. This Working Paper relates to the 2012 OECD Economic Survey of Turkey (www.oecd.org/eco/surveys/turkey).
Keywords: Turkey, financial market policy, saving, current account, fiscal policy, monetary policy, competitiveness
F32: International Economics / International Finance / Current Account Adjustment; Short-term Capital Movements;
E3: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles;
F41: International Economics / Macroeconomic Aspects of International Trade and Finance / Open Economy Macroeconomics;
E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy;
E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy;
O11: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Macroeconomic Analyses of Economic Development;
O52: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Europe;
E2: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy;
E44: Macroeconomics and Monetary Economics / Money and Interest Rates / Financial Markets and the Macroeconomy;
G18: Financial Economics / General Financial Markets / General Financial Markets: Government Policy and Regulation