Well, I guess it would be unfair to say that they don’t. But if you ask me whether or not CBRT measures will prevent exchange rates from going higher, I have one clear answer to that: “No”.
CBRT Administration is not a group of wizards, which means they cannot work miracles. Besides, it’s not fair to expect central banks provide a solution to each and every problem. Unfortunately, however, former bureaucrats or those who worked overtime at banks’ economic research departments are suffering from an almost incurable fanaticism; because, in their opinion, Central Banks are a cure-all.
I believe that those who have unrealistic expectations from the CBRT are as wrong as those who think that the CBRT is no longer functional; because, in the 21st century, Turkey, as a developing country, does not have the chance to implement a sovereign “national monetary policy”. Although set forth in provisions of the CBRT Law, the Central Bank of the Republic of Turkey has no power to prevent depreciation of national currency, let alone reducing inflation without any help. The only thing that the CBRY could do is to delay it as long as possible; which was the case so far.
Neither high interest rates nor Turkey’s large current account deficit or high external debt are the only causes of only cause of TRY’s depreciation. The main cause of the problem is Turkey’s current growth model. This is the price we are paying now, because Turkey has grown fast without proper development, preferred certain sectors over the others, and set its priorities wrong. But, can we blame the CBRT alone for all of this? Of course, we can’t. However, CBRT is expected to treat and prevent the deterioration caused by inefficient use of resources and a wrong set of priorities.
“Touchy and angry…”
First the Central Banks went for a rate hike, which did not work. Then they pegged the exchange rates in rediscount credits to help exporters. These hasty measures, however, seem problematic in terms of coordination.
I can almost hear the CBRT say, “If you’re such an expert, why don’t you do our job for us?” As a matter of fact, I consider myself quite experienced when it comes to making the right decision under pressure. And all the actions and decisions that I have taken so far can be considered as “Nothing so bad but it might have been worse”. Accordingly, I think it is of utmost importance that, especially in this process, the Economy Administration tries to avoid being too touchy, pay attention to concrete suggestions, but more importantly, they should learn how to stay calm under stressful situations.
As far as I gathered from my conversations with the economy officials last week, they got really angry with certain economists making appearances on major media outlets. Sadly, I think this malaise can continue until the elections are over.