The Turkish economy after the global financial crisis

This paper of mine on the Turkish economy was completed more than a year ago but has just been published in the new journal of the Turkish Economic Association. Re-reading it, I feel it captures well the missed opportunities of the last few years.

Unwillingness to use fiscal policy in a countercyclical manner (tighten when times are good), discourage capital inflows, and prevent real exchange rate appreciation until it becomes too late have once again placed the Turkish economy on an unsustainable course. Worse, with an external deficit reaching close to double-digit levels, the economy is poised for a painful hard landing as soon as confidence turns south – triggered, for example, by bad news in the Eurozone.

As recent experience shows, the countries that are worst hit by sudden flight to safety in financial markets tend to be those caught with large external deficits:

Governments that engineer growth accelerations on the back of unsustainable foreign borrowing booms like to repeat the mantra “this time it is different.” Unfortunately, few current account deficits as large as Turkey’s end well.

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[Account Deleted]

This is not only Turkey. Across the world fiscal deficit has become to popular that countries are taking measures to cut fiscal deficit at any cost. and this is what that is costing the world economy during this period of crisis. Fiscal deficit must be controlled and managed but it is not a bad thing. There is always right time for everything and taking measures to cut fiscal deficit at such moment is not right time for maximum of the economies in the world. Instead they must concentrate on increasing economic activities in their respective economies. Once the economic activities increase the problem of fiscal deficit will be taken care over time as the economy will not more fiscal support when economic cycle is upward.

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india was also going through economy slowdown in 2008.. people were thrown out of the jobs.. really turkey might have followed the history of great depression 1929

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