nep-ara New Economics Papers
on Arab World
Issue of 2011‒10‒15
ten papers chosen by
Quentin Wodon
World Bank

  1. The experience with macro-prudential policies of the central bank of the republic of Turkey in response to the global financial crisis By Kenc, Turalay; Turhan, M. Ibrahim; Yildirim, Onur
  3. Turkey’s trilemma trade-offs: is there a role for reserves? By Cortuk, Orcan; Singh, Nirvikar
  4. Distributional impact analysis of the energy price reform in Turkey By Zhang, Fan
  5. The bank lending channel in Turkey: Has it changed after the low inflation regime? By Catik, A. Nazif; Karaçuka, Mehmet
  6. Do Bank Stockholders Share the Burden of Required Reserve Tax? Evidence from Turkey By Mahir Binici; Bulent Koksal
  7. Technical Change Performance and Water Use Efficiency in the Irrigated Areas: Data Envelopment Analysis Approach By Chemak, Fraj
  8. Inflation Targeting and Monetary Policy Transmission Mechanisms in Emerging Market Economies By Sanchita Mukherjee; Rina Bhattacharya
  9. Productive Efficiency in Water Usage: An Analysis of Differences among Citrus Producing Farms Sizes in Tunisia By Dhehibi, Boubaker
  10. Monetary Policy Communication Under Inflation Targeting : Do Words Speak Louder Than Actions? By Selva Demiralp; Hakan Kara; Pinar Ozlu

  1. By: Kenc, Turalay; Turhan, M. Ibrahim; Yildirim, Onur
    Abstract: This brief country case study on Turkey aims to summarize the fundamental developments in the banking sector, which represents almost 90 percent of the financial sector in the country. The brief has two parts. The first covers the 2001 financial crisis and the developments until end of 2007, the year before the global financial crisis of 2008 started. The second part focuses on the macro-prudential policies applied by the Central Bank of the Republic of Turkey in response to the global financial crisis in three phases: (i) full liquidity support after Lehman Brothers'collapse (September 2008), (ii) the exit strategy (April 2010), and (iii) the new policy mix (final quarter of 2010).
    Keywords: Debt Markets,Banks&Banking Reform,Currencies and Exchange Rates,Emerging Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2011–10–01
  2. By: Fellmann, Thomas; van Leeuwen, Myrna; Salamon, Petra
    Abstract: The potential accession of Turkey to the EU, and the related adoption of the CAP by Turkey, is expected to influence agricultural markets in both the EU and Turkey. The extent of the accession impacts depends on the one hand on the way the CAP will be implemented in Turkey, while on the other hand impacts are expected to be also shaped by macroeconomic conditions (like exchange rates, GDP growth and inflation levels). In this paper we provide a comprehensive model-based assessment of the potential impacts on agricultural markets of a Turkish accession to the EU. We first assess the impacts under the assumption of standard macroeconomic projections, then we analyse how a different TL/Euro exchange rate, a doubling of the Turkish inflation rate or a doubling of the Turkish GDP growth rate would influence the accession impacts. Results of the Turkish EU-membership simulation show that the impacts on agricultural markets in Turkey are significant, while effects on EU markets are rather limited. The main impact on Turkish agriculture is a reduction of producer prices. With market prices and produced quantities declining, and as the coupled Turkish direct payments and the input subsidies will be replaced by lower payments of the CAP, agricultural income is expected to be reduced especially for Turkish crop producers (except for tobacco). In contrast, accession effects on the Turkish livestock sector are projected to be positive, mainly due to lower feed costs. Furthermore, the demand levels of most commodities are projected to increase due to lower prices, thus Turkish consumers are expected to gain from an accession to the EU. The further analysis reveals that in particular a depreciation of the Turkish lira alters the results of the accession scenario.
    Keywords: Turkey, EU enlargement, agricultural markets, macro economy, AGMEMOD Zusammenfassung, Türkei, EU Erweiterung, Agrarmärkte, Makroökonomie, AGMEMOD, Agribusiness, Agricultural and Food Policy, Agricultural Finance,
    Date: 2011
  3. By: Cortuk, Orcan; Singh, Nirvikar
    Abstract: In this paper, we study the trilemma configuration of the Turkish economy. The paper starts by empirically testing the Mundell-Fleming theoretical concept of an “impossible trinity” (trilemma) for Turkey, following the Aizenman, Chinn and Ito (ACI) approach. This includes calculating the trilemma indices and investigating their evolution over the period of 1998Q1-2010Q4, which is split into three sub-samples according to the Turkey’s macroeconomic policies. We also introduce alternative empirical techniques in order to deal with possible misspecification problems detected in the ACI approach. These techniques include employing additional terms in the regression, Two Stage Least Squares, General Method of Moments and Kalman filtering. The analysis supports the conclusion that the trilemma trade-offs are binding for Turkey for each sub-period. Besides, it shows how contributions of financial integration and monetary independence have increased from the first period to the last, with corresponding limitations on exchange rate stability. The analysis continues by exploring the implications of changes in the trilemma indices for macroeconomic outcomes. Accordingly, it reveals evidence that financial integration and monetary autonomy together with corresponding loss of exchange rate stability have impacts on growth volatility, inflation and inflation volatility throughout 1998-2010, though these effects might differ for each sub-period. Finally, it finds that there is a key role for raising international reserves as trilemma trade-offs and their effects on macroeconomic variables have been mitigated with their accumulation
    Keywords: Financial trilemma; Turkish economy; International reserves; Monetary policy; Capital account opening
    JEL: F4 F3 E5 E4
    Date: 2011–08–26
  4. By: Zhang, Fan
    Abstract: A pricing reform in Turkey increased the residential electricity tariff by more than 50 percent in 2008. The reform, aimed at encouraging energy efficiency and private investment, sparked considerable policy debate about its potential impact on household welfare. This paper estimates a short-run residential electricity demand function for evaluating the distributional consequences of the tariff reform. The model allows heterogeneity in household price sensitivities and is estimated using a national sample of 18,671 Turkish households. The model also addresses the common problem of missing data in survey research. The study reveals a highly skewed distribution of price elasticities in the population, with rich households three times more responsive in adjusting consumption to price changes than the poor. This is most likely because the poor are close to their minimum electricity consumption levels and have fewer coping options. In addition, the welfare loss of the poorest quintile -- measured by the consumer surplus change as a percentage of income -- is 2.9 times of that of the wealthiest.
    Keywords: Energy Production and Transportation,Climate Change Economics,Markets and Market Access,Economic Theory&Research,Environment and Energy Efficiency
    Date: 2011–10–01
  5. By: Catik, A. Nazif; Karaçuka, Mehmet
    Abstract: In this paper we aim to analyze the role of credit channel in the monetary transmission mechanism under different inflationary environments in Turkey covering the period 1986:1 - 2009:10. Our results suggest that traditional interest rate channel is only valid for the postinflation targeting period. This variable is also more effective monetary policy tool in terms of its impacts on economic activity in the both regimes. Credit shocks itself have significant power on economic activity and prices. However, the effect of monetary shocks on credit volume is very limited especially in the low inflation regime. --
    Date: 2011
  6. By: Mahir Binici; Bulent Koksal
    Abstract: This study examines whether bank shareholders bear the burden of required reserves tax by analyzing the reaction of banks’ stock returns to the changes in the required reserve ratio. Results show that increases in reserve requirements significantly lower bank returns implying that shareholders share a portion of the required reserve tax. Required reserves changes are partially predicted by investors, and increases and decreases in required reserve rates have an asymmetric effect on stock returns. In addition, large and public banks bear a larger share of the tax, and the remuneration of reserves has important implications for the tax burden. Finally, some heterogeneity across banks exists as reflected by differences in the signs and magnitudes of the estimated coefficients.
    Keywords: Stock returns, required reserves tax, monetary policy, tax incidence, Istanbul Stock Exchange (ISE), Turkey
    JEL: E52 E58 G20 G21 G28
    Date: 2011
  7. By: Chemak, Fraj
    Abstract: In order to cope with the water scarcity, Tunisia has to manage efficiently the water demand of the economic and social sectors mainly that of the agricultural irrigated activities. Within this context, this investigation aims to analyze the technical efficiency, the water use efficiency and the dynamic of the productivity of the irrigated areas in the Sidi Bouzid region. Farm surveys have been carried out during 2003 and 2007 cropping years and technology performance has been assessed using Data Envelopment Analysis approach. Malmquist index has been also computed in order to characterize the productivity change. Empirical findings showed that the technical efficiency of the farms has increased by 17% during this period leading to an improvement of the water use efficiency up to 22%. Both, the technical efficiency change as well as the technical change reveal a positive impact on the productivity change. However, in 2007, the water use efficiency was only 78%. Therefore, farmers have to improve further their irrigated practices in order to save more water.
    Keywords: Irrigated Area, Technical Efficiency, Water Use Efficiency, Productivity Change, Data Envelopment Analysis, Resource /Energy Economics and Policy,
    Date: 2011
  8. By: Sanchita Mukherjee; Rina Bhattacharya
    Abstract: In this paper we empirically examine the operation of the traditional Keynesian interest rate channel of the monetary policy transmission mechanism in five potential inflation targeting economies in the MENA region and compare it with fourteen inflation targeting (IT) emerging market economies (EMEs) using panel data analysis. Contrary to some existing studies, our empirical results suggest that private consumption and investment in both groups of countries are sensitive to movements in real interest rates. Moreover, we find that the adoption of IT did not significantly alter the operation of the interest rate channel in IT EMEs. Also, the interest rate elasticities of private consumption and private investment vary with the level of development of the domestic financial market. Finally, capital account liberalization have opposite effects on private consumption and private investment in the two groups of countries.
    Keywords: Banks , Cross country analysis , Demand , Emerging markets , Inflation targeting , Interest rates , Middle East , Monetary policy , North Africa , Private consumption , Private investment , Private sector ,
    Date: 2011–10–03
  9. By: Dhehibi, Boubaker
    Abstract: The objective of this paper is to measure productive efficiency of irrigation water efficiency based on the concept of technical efficiency and compared among different sizes farms in Tunisia. The proposed methodology is applied to a randomly selected sample of 144 citrus growing farms and differentiated by size (small, medium and large farms). A stochastic production frontier approach, based on Battese and Coelliâs (1995) inefficiency effect model, is used to obtain farm-specific estimates of technical and irrigation water efficiency. The last step of the analysis consists on the identification of the factors influencing irrigation water efficiency differentials across citrus growing farms. Empirical results show that estimated mean technical efficiency ranges from a minimum of 12.82% to a maximum of 90.69% with an average estimate of 67.73%. This result means that 32.3% increase in production is possible with the present state of technology and unchanged input uses, if technical inefficiency is completely removed. Thus, improving technical efficiency will result to significant increases in framerâs revenue and profit. On the other hand, mean irrigation water efficiency is found to be 53%, which is much lower than technical efficiency and also exhibits greater variability ranging from 1.6% to 98.87%. Estimated mean irrigation water efficiency implies that the observed quantity of marketable citrus could have been maintained by using the observed values of other inputs while using 47.0% less of irrigation water. This means that farmerâs can achieve significant savings in water use by improving irrigation system technologies.
    Keywords: Water Efficiency, stochastic frontier production function, small, medium and large citrus farms, Tunisia, Crop Production/Industries,
    Date: 2011
  10. By: Selva Demiralp; Hakan Kara; Pinar Ozlu
    Abstract: This paper assesses the effectiveness of monetary policy communication of the Central Bank of Turkey (CBT) by quantifying the information content of the policy statements released right after the monthly Monetary Policy Committee meetings. First, we quantify the signal regarding the next interest rate decision and ask whether communication improves predictability. Our findings suggest that the role of statements in predicting the next policy move have strengthened following the adoption of full-fledged inflation targeting (IT) regime. Second, we identify the surprise component of policy communication directly from market commentaries and assess its impact on the term structure of interest rates. We find that the response of the yield curve to policy statements have become highly significant for the unanticipated changes in the monetary policy communication, especially after the implementation of the IT. We also compare the yield curve impact of the surprise component of policy decisions (actions) with the surprises in policy communication (words). Our results suggest that the relative importance of communication in driving market yields have increased through time.
    Keywords: Central Bank Communication, Predictability, Transparency
    JEL: E52 E58
    Date: 2011

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