Hasan Cömert

INFLATION TARGETING IN SOUTH AFRICA: FRIEND OR FOE OF DEVELOPMENT?

ABSTRACT In this study we focus on the South African experience with inflation targeting. We make two major claims in this paper. First, the South African experience with inflation targeting before the crisis was not successful, not in terms of advocates’ self-stated goals and certainly not in terms of key, ultimate real sector goals such as lower unemployment and higher economic growth. Second, as in a number of other countries, the SARB policy regime as well as its rhetoric about monetary policy significantly changed in response to the crisis of 2008. While these changes are an important step in the right direction of reorienting monetary policy toward important real goals of employment generation and economic growth, they are nevertheless still not adequate to the crucial task of creating a macroeconomic framework geared toward achieving these crucial goals.

Financialisation and the financial and economic crises: the case of Turkey

This study aims to evaluate the relationship between the real sector and the financial sector in the era of neoliberalism. To this end, we focus on the implications of financial developments for the main macroeconomic variables, including consumption, investment and income distribution. We also explore the impacts of the recent crisis on Turkish economy and the policies taken in response to the crisis. The overall findings of this report provide considerable support to four interrelated arguments. First, many well established properties of financialisation in advanced countries are not found in the Turkish case. Second, as opposed to domestically driven financialisation tendencies, financial flows, a part of global financialisation, have dominated important trends in the Turkish economy. Third, under the significant influence of financial flows, in general, the Turkish economy has shown a debt-led consumption boom type growth. Fourth, although the role of the export shock in explaining the impact of the recent crisis on the Turkish economy is very distinctive, the role of financial flows in the recent and especially previous crises are very important as well.

The Impacts of the Global Crisis on the Turkish Economy and Policy Responses

This paper focuses on the impacts of the recent global crisis on the Turkish economy and the policy measures taken in response to the crisis. Turkish economy was adversely affected by the crisis through mainly three channels, namely expectations channel, trade channel and financial channel. The distinctive characteristic of the crisis was a severe export shock which can account for an important part of the decline in production in Turkey. Beside this, a significant sudden stop in financial flows worsened the credit conditions in the economy. As a result, the Turkish economy witnessed one of its worst economic down-turns after the Second World War. In fact, the Turkish growth performance was one of the worsts among developing countries. However, as opposed to previous crises, the financial markets in Turkey and many other developing countries did not experience a collapse. We argue that this is mainly related to the small magnitude and short duration of the financial shocks hitting Turkey and other developing countries relative to the ones in the previous decades. In this sense, the Turkish economy might not have been fully tested during the last global crisis. How the economy will behave in case of a larger financial shock is still unknown.

Central Banking in Developing Countries after the Crisis: What has changed? 1

The aim of this paper is to assess how the theory and practices of central banking have evolved in developing countries in response to the crisis of 2008-2009. Our findings suggest that the recent experiences of both advanced countries and developing countries during and after the global economic crisis have exposed the problems within mainstream monetary theory. In response to the crisis, mainstream thinking has been revised considerably. In line with this, there is also a shift in central banking practices in developing world. As a result, central banks now have multiple goals and multiple tools in developing countries as well. Yet, this shift is insufficient to trigger a major change in understanding and implementing monetary policy. Especially, in the absence of a rethinking of the international financial architecture and comprehending the specific natures of the transmission mechanisms in developing world, developing countries are not satisfactorily capable of implementing effective monetary policy and are still heavily exposed to external shocks. JEL Classification E 52; E 58; O 57; G 15; G 01

Central Banks and Financial Markets

In the wake of the financial crisis of 2008, there has been increasing debate over the appropriate role of central banks in mitigating economic disaster. This timely volume combines detailed historical and econometric analyses to explore the profound changes that occurred within the US financial system from the 1980s to the present, and shows how these changes have affected the US economy.