|
on Central and Western Asia |
| By: | Cem Cakmakli (Koç University); Selva Demiralp (Koç University); Sebnem Kalemli Ozcan (University of Maryland, NBER and CEPR); Sevcan Yesiltas (Koç University); Muhammed Ali Yildirim (Koç University & Center for International Development at Harvard University) |
| Abstract: | The COVID-19 crisis can turn into the biggest emerging market (EM) crisis ever. EMs are observing record capital outflows and depreciating currencies, while trying to come up with fiscal resources necessary to fight the pandemic. This paper focuses on a large EM, Turkey. Turkey provides us with a good laboratory given its low foreign currency reserves, high foreign currency debt and a questionable record on monetary policy credibility, all of which are the characteristics of several EMs. We develop a simple framework incorporating a SIR model in a reduced form economic model. We proxy supply shocks with a measure that synthesizes infection rates with teleworkers, physical job proximity and lockdown policies. Demand shocks are captured with credit card purchases. We also incorporate the fact that Turkey is a small open economy with trade linkages. Our estimates show that the lowest economic cost, which saves the maximum number of lives, can be achieved under an immediate full lockdown. Partial lockdowns, which is the current policy, amplify the economic toll because the normalization takes longer. We highlight that it is necessary for the economic units to be compensated during the lockdown and yet Turkey’s policy options are limited given its low fiscal space, and reliance on capital flows that require both external and domestic funding. The external funds can be secured through international financial institutions. On the domestic front, the Turkish Central Bank can provide funding with a well-targeted and transparent asset purchase program (QE). As an example of such a policy, we provide the details of a successful historical episode: Turkish Central Bank monetized the government debt with a clearly communicated disinflation program under an IMF Stand-By Agreement, in the aftermath of 2001 triple crisis (banking, sovereign, balance of payments). |
| Keywords: | COVID-19; Financial Crisis; SIR; Input-Output Tables; Emerging Markets. |
| JEL: | E61 F00 C51 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:2011&r=all |
| By: | Chowdhry, Sonali; Jacobs, Anna-Katharina; Kamin, Katrin |
| Abstract: | Iran is one of the countries most affected by COVID-19 worldwide and is considered the epicenter of the outbreak in the Middle East. The growing number of cases in combination with the already ailing economy is putting increasing pressure on the Iranian healthcare system. The delayed reaction of the Iranian government to the outbreak of the pandemic and the low level of political confidence of the population in politics aggravate the crisis situation. In their contribution, the authors show that the far-reaching sanctions Iran has been subject to since the US withdrew from the nuclear agreement make it difficult for the health care system to react quickly to COVID-19. The authors recommend that the European Union, in its role as a responsible "global player", ensure the transfer of medical equipment for humanitarian purposes to Iran and strengthen cooperation efforts in the wake of the pandemic at the level of multilateral institutions. The EU should also play an active role in maintaining the dialogue between the USA and Iran. |
| Keywords: | COVID-19,Iran,Sanctions,Trade Policy,Sanktionen,Handelspolitik |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkpb:137&r=all |
| By: | Zarei, Samira |
| Abstract: | While the petrochemical products and their revenues have been the most important part of Iranian non-oil exports, after imposing the international sanctions on Iran’s economy, these revenues, reflected in the petrochemical stock index, have fluctuated. In line with this, the effects of some main macroeconomic variables on the petrochemical stock index have become more crucial than before. Among the macroeconomic variables, inflation and exchange rate are the most effective. Hence, To investigate whether the exchange rate misalignments and inflation are significant indicators of changes in the petrochemical stock index, this paper has been applied the time series data from January 2012 to January 2020 and an asymmetric and non-linear framework, NARDL. The empirical results in addition to prove the existence of asymmetric and significant relationships between the research variables, confirm that the impacts of negative components of exchange rate misalignments and, conversely, positive components of inflation have been stronger than the effects of their decomposed counterparts both in the long run and short run. |
| Keywords: | Petrochemical Stock Index, Exchange Rate Mis-alignments, Inflation, NARDL Model |
| JEL: | C22 E31 F31 G11 G17 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99101&r=all |
| By: | Zarei, Samira |
| Abstract: | This paper, through an asymmetric and non-linear framework, NARDL Model, investigates how real exchange rate movements affect the economic growth of Iran. In other words, whether the movements in the real exchange rate is an indicator of economic growth changes. Working on the monthly data of Gross Domestic Production (GDP) and Real Exchange Rate indexes from November 2009 to November 2019, this study shows asymmetric and negative relationships between exchange rate and economic growth both in the long run and short run. Although, in the long run, the magnitude of effects both positive and negative components of exchange rate on economic growth were significantly more than those of short run, the stability of the results have indicated that the roots of existing nonlinear and asymmetric relationships among these variables are so strong that change in time horizon, from the short run to long run, has also not been able to change them. |
| Keywords: | Economic Growth, Exchange Rate, NARDL, Nonlinear and Asymmetric Relationships |
| JEL: | C22 C52 F31 F43 O24 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99102&r=all |