nep-ara New Economics Papers
on Arab World
Issue of 2013‒08‒05
twelve papers chosen by
Paul Makdissi
University of Ottawa

  1. Some Observations on the Convergence Experience of Turkey By Murat Ungor
  2. Implicit Asymmetric Exchange Rate Peg under Inflation Targeting Regimes: The Case of Turkey By Ahmet Benlialper; Hasan Cömert
  3. How do Banks’ Stock Returns Respond to Monetary Policy Committee Announcements in Turkey? Evidence from Traditional versus New Monetary Policy Episodes By Guray Kucukkocaoglu; Deren Unalmis; Ibrahim Unalmis
  4. GDP Growth and Credit Data By Ergun Ermisoglu; Yasin Akcelik; Arif Oduncu
  5. Financial Development and Economic Growth in Egypt: A Re-investigation By Kamal, Mona
  6. Alternative Tools to Manage Capital Flow Volatility By Koray Alper; Hakan Kara; Mehmet Yorukoglu
  7. Peculiarities of management accounting in Libya By Iacob, Constanta; Karim, Abdelali Abdel
  8. Transition to Higher Education Examination Outcomes: Does High School Matter? By Bengi Yanik Ilhan; Sumru Oz
  9. Reserve Option Mechanism as a Stabilizing Policy Tool : Evidence from Exchange Rate Expectations By Ahmet Degerli; Salih Fendoglu
  10. A Contribution of Foreign Direct Investment, Clean Energy, Trade Openness, Carbon Emissions and Economic Growth to Energy Demand in UAE By Sbia, Rashid; Shahbaz, Muhammad; Hamdi, Helmi
  11. Fiscal Policy Institutions and Economic Transition in North Africa By Baldi, Guido
  12. Gelişmekte Olan Ülkelerdeki Kriz Sırası ve Sonrasındaki Trendleri Açıklamakta "Güvenli Liman Faktörü" ve Finansal Şokların Boyutunun Önemi: Türkiye Örneği By Hasan Cömert; Selman Çolak

  1. By: Murat Ungor
    Abstract: This study, without providing a complete picture of the country’s economic development, aims to bring about a better understanding of the convergence experience of Turkey. We explore some aspects of the convergence process of Turkey and provide some international comparisons tracking the changes in both nominal and real per capita income figures. With respect to the per capita income, Turkey is closer to Brazil than to Korea. From the 1960s until now, Korea is closing the gap in per capita income that separates the country from the richest countries of the world. On the other hand, Brazil and Turkey lost ground in the last two-three decades of the 20th century. After the lost decades, Turkey had high growth rates during 2002-2007. We perform a growth accounting exercise and discuss the importance of productivity growth in Turkey’s long-run growth. Lastly, we carry out an exercise, in which we decompose the growth rate of nominal per capita income into the growth rates of real GDP and population in Turkey; the rate of inflation in the U.S.; and the appreciation of the Turkish Lira. We present several alternative scenarios for the time-path of per capita income in Turkey
    Keywords: Turkey, comparative studies of countries, convergence, growth accounting
    JEL: N10 O11 O40 O47 O57
    Date: 2013
  2. By: Ahmet Benlialper (Department of Economics, METU); Hasan Cömert (Department of Economics, METU)
    Abstract: Especially, after the 2000s, many developing countries let exchange rates float and began implementing inflation targeting regimes based on mainly manipulation of expectations and aggregate demand. However, most developing countries implementing inflation targeting regimes experienced considerable appreciation trends in their currencies. Might have exchange rates been utilized as implicit tools even under inflation targeting regimes in developing countries? To answer this question and investigate the determinants of inflation under an inflation targeting regime, as a case study, this paper analyzes the Turkish experience with the inflation targeting regime between 2002 and 2008. There are two main findings of this paper. First, the evidence from a Vector Autoregressive (VAR) model suggests that the main determinants of inflation in Turkey during this period are supply side factors such as international commodity prices and the variation in exchange rate rather than demand side factors. Since the Turkish lira (TL) was considerably over-appreciated during this period, it is apparent that the Turkish Central Bank benefited from the appreciation of the TL in its fight against inflation during this period. Second, our findings suggest that the appreciation of the TL is related to the deliberate asymmetric policy stance of the Bank with respect to the exchange rate. Both the econometric analysis from a VAR model and descriptive statistics indicate that appreciation of the Turkish lira was tolerated during the period under investigation whereas depreciation was responded aggressively by the Bank. We call this policy stance under the inflation targeting regimes as “implicit asymmetric exchange rate peg”. The Turkish experience indicates that, as opposed to rhetoric of central banks in developing countries, inflation targeting developing countries may have an asymeyric stance toward exchange rates and favour appreciation of their currencies to hit their inflation targets. In this sense, IT seems to contribute to the ignorance of dangers regarding to over-appreciation of currencies in developing countries.
    Keywords: Inflation Targeting, Central Banking, Developing Countries, Exchange Rates
    JEL: E52 E58 E31 F31
    Date: 2013–07
  3. By: Guray Kucukkocaoglu; Deren Unalmis; Ibrahim Unalmis
    Abstract: Using a methodology that is robust to endogeneity and omitted variables problems, it is found that the stock returns of all banks that are listed in Borsa Istanbul respond significantly to the monetary policy surprises on Monetary Policy Committee (MPC) meeting days prior to May 2010. It is shown that stock returns of banks for which interest payments constitute an important share in their balance sheets respond more aggressively to the changes in policy rates. In addition, foreign banks and participation banks give relatively less responses to monetary policy surprises. Estimation results differ between traditional and new monetary policy episodes.
    Keywords: Monetary Policy, Stock Market, Banking System, Emerging Markets, Identification through Heteroscedasticity
    JEL: E43 E44 E52
    Date: 2013
  4. By: Ergun Ermisoglu; Yasin Akcelik; Arif Oduncu
    Abstract: It is a well-known fact that there is a strong relationship between bank credit and economic activity. Thus, it is a reasonable question whether credit data can be used in nowcasting GDP growth. It is important for policymakers to make on-time decisions with the most available data. Most macroeconomic variables are made available to public after a considerable delay; however, bank credit data may be very valuable for the early estimate of current GDP as it is available only with a few days delay. In this paper, we aim to investigate the feasibility of using credit data in explaining the variability in Turkish GDP growth as well as nowcasting it. For this purpose, we use credit impulse and new borrowing, two measures of credit flows. We show that both are significant in explaining the pattern of the Turkish GDP growth and have significant contribution in nowcasting it.
    Keywords: Nowcasting GDP, Credit Impulse, New Borrowing
    JEL: C22 C53 E37
    Date: 2013
  5. By: Kamal, Mona
    Abstract: In light of the political and economic conditions that Egypt has challenged during the last two years and its influences, it is crucial to re-investigate the link between financial sector and economic growth using recent data sample. This paper re-explores it using annual data for the period from 1988 to 2012. The results imply that the banking sector development has a unidirectional causal impact on economic growth. However, stock market development does not cause growth. The interpretation of such outcomes has to be taken with caution since other relevant factors are more likely to affect this link.
    Keywords: Financial Development, Economic Growth, Egypt.
    JEL: E44 O53
    Date: 2013–07–23
  6. By: Koray Alper; Hakan Kara; Mehmet Yorukoglu
    Abstract: Heightened volatility in cross-border capital flows has increased exchange rate volatility across emerging markets as well as in advanced economies, setting the stage for more active management of currencies. Traditionally, foreign exchange rate intervention has been the primary tool to address these types of challenges. However, given the limitations of foreign exchange rate intervention, it may be well worthwhile to explore alternative mechanisms for dealing with capital flow volatility. This paper explains how the new policy framework adopted by the Central Bank of the Republic of Turkey (CBRT) in the past two years has eased the need to conduct FX interventions. We first describe the rationale for the new policy framework, which is an augmented version of inflation targeting, with more emphasis on macro financial risks. Next, we explain the new instruments developed by the CBRT and their contribution to coping with capital flow volatility. In particular, we focus on the Reserve Option Mechanism, which is designed as a shock absorber for volatile capital flows, and thus reduces the need for FX intervention. We demonstrate that, since the adoption of new policy tools, the volatility of the Turkish lira has been remarkably low in comparison with the currencies of peer economies.
    Keywords: Monetary policy, Capital flows, Exchange rate interventions, Financial stability
    JEL: E52 E58 F31 F32
    Date: 2013
  7. By: Iacob, Constanta; Karim, Abdelali Abdel
    Abstract: Management Arabian and Anglo-American countries are different in style and orientation. Arab managers are concerned with the observance of the rules, regulations and customs instead of exercising their professional judgment style that leads to a sense of helplessness institution. Although Anglo-American management techniques have had an impact on management accounting in the Arab countries, the effectiveness of management shows different models based on a different style of motivational efficacy in relation to Anglo-American culture. In this context, we try to present some aspects of management accounting peculiarities in Libya
    Keywords: management, culture, accounting, different style, arab world
    JEL: M41 Q55
    Date: 2013–07–26
  8. By: Bengi Yanik Ilhan (Faculty of Economics, Istanbul Kemerburgaz University); Sumru Oz (Economic Research Forum, Koc University-TUSIAD)
    Abstract: Abstract This paper estimates the impact of school quality on the transition to higher education examination (abbreviated as YGS in Turkey) outcomes by controlling for the student quality. Either the class size or the teacher-pupil ratio in main branches is used as a proxy for the quality of schools. Due to data limitations we concentrate on the Anatolian High Schools (AHS) in Istanbul. This choice gives us the opportunity to control for the student quality by making use of the minimum OKS score required for admission to each AHS. Using YGS scores for 2010&2011 and OKS scores for 2006&2007 corresponding to the same cohort, we find that student quality explains the transition to higher education examination outcomes to a large extent. Holding constant student quality however, we find no evidence that class size or the teacher-pupil ratio affects average YGS score of AHS. This can be explained by the relatively standardized school resources devoted to AHS. The results are robust to different scorings of YGS and to the inclusion of clustering.
    Keywords: Unemployment; Education, High schools, Entrance exams, Cluster.
    JEL: I20 I21 C38
    Date: 2013–07
  9. By: Ahmet Degerli; Salih Fendoglu
    Abstract: During the recent era, many emerging market economies have implemented unconventional policy measures to mitigate the effect of large swings in short-term capital flows on domestic business cycles. This paper focuses on a specific unconventional policy tool introduced by the Central Bank of Turkey, the Reserve Option Mechanism (ROM), that in principle contains excessive fluctuations in foreign exchange rate and helps cushion the economy from large swings in external factors. The results suggest that, after the introduction the ROM (i) market expectations are leaned towards a significantly lower volatility or skewness in the USD/TL relative to other emerging market exchange rates; (ii) controlling for a set of domestic and common external factors, the USD/TL expectations have exhibited lower levels of volatility, skewness and kurtosis; (iii) the higher the intensity of ROM (the fraction of ROM-based reserves in total international reserves) the stronger the effect of ROM on exchange rate expectations. Last, we provide evidence that the mechanism acts as an automatic stabilizer of expectations about excessive movements in the exchange rate: the mechanism decreases the sensitivity of expected USD/TL kurtosis to the common external factor (by an estimated decrease of about 85%).
    Keywords: Options-based Exchange Rate Expectations, Reserve Option Mechanism, Unconventional Monetary Policy
    JEL: F31 F40
    Date: 2013
  10. By: Sbia, Rashid; Shahbaz, Muhammad; Hamdi, Helmi
    Abstract: This paper investigates the relationship between foreign direct investment, clean energy, trade openness, carbon emissions and economic growth in case of UAE covering the period of 1975Q1-2011Q4. We have tested the unit properties of variables in the presence of structural breaks. The ARDL bounds testing approach is applied to examine the cointegration by accommodating structural breaks stemming in the series. The VECM Granger causality approach is also applied to investigate the causal relationship between the variables. Our empirical findings confirm the existence of cointegration between the series. We find that foreign direct investment, trade openness and carbon emissions decline energy demand. Economic growth and clean energy has positive impact on energy consumption.
    Keywords: Clean Energy, FDI, Emissions, Trade, Income
    JEL: E1
    Date: 2013–07–19
  11. By: Baldi, Guido
    Abstract: Sound public finances are crucial for ensuring a successful transformation of transition countries to democratic market economies. The transition countries in North Africa are an important example for this. These countries experienced increasing budget deficits in 2011 and 2012. Public finances will probably remain a serious issue in the coming years due to political uncertainties, distributional struggles and weak world economic growth. What kind of institutional rules for the budget process are suitable to limiting the size of these potential budget deficits in a new democracy? In this paper, I argue that numerical fiscal restraints are not the right tool to reduce budget deficits in a new and fragile democracy. Instead, I hold the view that a strong finance minister and a transparent budget process are much more important than numerical fiscal rules. Assigning prerogatives to the finance minister allows limiting the political deficit bias that may arise due to distributional struggles over government spending and revenue. History has shown that numerical policy rules on their own do not lead to desirable outcomes if they are not supported and embedded by the main political parties. If there are weak institutions, fiscal policy rules might even have a perverse effect when politicians – in trying to comply with the rules – use optimistic forecasts and creative accounting, which would lead to a deterioration of the actual budget situation. Therefore, transition countries should first focus on improving the transparency and accountability of the budget process.
    Keywords: Fiscal Policy Institutions, Numerical Rules, Constitutional Economics
    JEL: E61 E62 H60
    Date: 2013–07
  12. By: Hasan Cömert (Department of Economics, METU); Selman Çolak (Department of Economics, METU)
    Abstract: 2008 krizinde Turkiye gibi bazi gelismekte olan ekonomiler ciddi manada sarsilsalar bile genel itibariyle gelismekte olan ulkeler krizi gelismis ulkelerden daha az zararla atlatmislardir. Gelismekte olan ulkelerin hemen hemen hic birisi finansal bir cokus yasamamistir. Turkiye gibi gelismekte olan ulkelerin ozellikle finansal bir cokus yasamamasinin arkasinda yatan nedenler nelerdir?. Bu makale gelismekte olan ulkelerin dunya krizinden gorece olarak daha az etkilenmis ve finansal bir cokusle karsilasmamis olmalari yasadiklari finansal soklarin onceki donemlerdeki soklara gore daha kucuk olmasindan kaynaklanmaktadir. Bu anlamda bu ulkelerin finansal sistemi kriz sirasinda test edilmis degildir. Gelismekte olan ulkelerin daha dusuk capli bir sok yasamis olmasi gelismis olan ulkelerin kriz sirasinda guvenli liman islevini tam olarak yerine getirememesiyle ilgilidir. Ozellikle merkez ulkelerindeki getiriler artmaya ve merkez ulkeler guvenli liman rolunu yerine getirmeye baslarsa Turkiye ekonomisi ve gelismekte olan ulkeler ic ve dis kaynakli nedenlerle beklentilerdeki ciddi degisimlere bagli olarak daha buyuk soklarla karsilasabilir. Bu da Turkiye gibi gelismekte olan ekonomilerin daha onceki donemlerdekine benzer krizleri yasamasina sebep olabilir
    Keywords: Gelismekte Olan Ulkeler, Turkiye Ekonomisi, Finansal Krizler, Guvenli Liman, Sermaye Hareketleri
    JEL: G01 G15 E50 F32
    Date: 2013–07

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