Prepared by Robert Tchaidze (EUR).
In 2001 seasonally-adjusted GDP fell by 11 percent from peak to trough and in 2009 by 13 percent.
Article 4, part I of the Law on the Central Bank of The Republic of Turkey states that “The fundamental duties of the Bank shall be … to take precautions for enhancing the stability in the financial system and to take regulatory measures with respect to money and foreign exchange markets.”
For FX, ROCs are 1.4 for 0–40 percent; 1.7, 2.0, 2.2, and 2.3 for increments of 5 percentage points until 60 percent. For gold, ROCs are 1 for 0–20 percent, 1.5 for 20–25 percent, and 2.0 for 25–30 percent.
The calculations are done on a daily basis, using compound rates.
For simplicity, October 17, 2011 is taken as the starting point of the second episode, although in reality there was a transition period of about three months.
See, for instance, http://www.tcmb.gov.tr/yeni/iletisimgm/Basci_Tek_Eng.pdf
By June 2011, the RRs on short-term TL liabilities were increased to 16 percent from 5 percent in October 2010.
This allows for the CBRT’s gross FX reserves to increase, even if the net reserves stay unchanged. As of August 17, 2012 at least 50 percent of these “converted” RRs should be held in the US dollars.
A number of announcements, coming from the CBRT under the new framework, has roughly doubled, also making interpretation of its actions difficult.
These are quotes from the market commentaries that suggest such an interpretation: “[T]he impulse response function of OMO suggests that the CBT tightens liquidity conditions in response to a depreciation of the lira. The rise in the CBT’s funding rate, in turn, supports the currency, with its maximum impact taking place within 10 days” (Citi); “[There is a] very close link between the monetary policy stance and availability of external financing. Unless the latter is sufficiently ample, monetary policy cannot ease much, no matter how desirable it may be, lest the lira weakens and complicates the inflation outlook and ruins corporate sector balance sheets” (Global Source Partners).
The CBRT conducts surveys twice a month. In these surveys it asks participants about their expectations of inflation 12-months ahead. These surveys are conducted on the 15th and the last day of each month and thus, the participants can take into account the actual inflation realization for the previous month, which is released in the first week of each month. The numbers used in this note are averages of two monthly surveys.
It is also interesting to observe that while from mid-2010 till late 2011 the CBRT managed to maintain market interest rates at levels comparable to other emerging markets, afterwards that proved to be insufficient and the interbank rates had to go up above those in other emerging countries.
Since 2009 the consumers no longer have access to FX lending, while corporate still do, which is likely to explain such a divergence in behavior of the spreads.