Economy debates easy money policy in Turkey
Güncelleme Tarihi:
by Selma Şimşek Bektaş - Referans
Oluşturulma Tarihi: Mart 19, 2009 00:00
ISTANBUL - Businesspeople and experts remain divided over the Central Bank’s money printing policy. As the discussions heat up, some claim that inflation is an ’outdated problem’now and monetary expansion should be implemented quickly, while some others urge a more cautious approach, as they fear that excessive money flow may generate hyperinflation
Printing and pumping new money into an economy has been a popular method utilized by many Western countries hoping to boost their economies, weakened by the heavy impact of the global turmoil. The move, however, has stirred up quite heated debate among business circles and experts here in Turkey.
The tone of the discussion intensified especially after State Minister Nazım Ekren’s statements last week. The government, which began to implement a tight fiscal policy in 2004, has to take measures that are completely opposite of that this time around, he said. Then the business world announced that the "same taboos including monetary expansion could also be opened to discussion," signaling that printing money could soon become a part of the agenda.
The fear of inflation during this period is quite incongruous, according to the leaders of the business world and academics, who urge the implementation of careful monetary expansion.
Inflation a past issue
Inflation is no more a problem, according to some businessmen. And that situation must be assessed as an opportunity in the midst of this crisis climate, they said. In addition to cutting key interest rate Central Bank could also help ease distress in the market by printing money, businessmen added.
Monetary expansion is a good idea, but it must be discussed thoroughly and then implemented with accuracy, according to some other business people. This group of people highlight the importance of cautious approach, because they believe, although money flow eases the market, it also brings the possible threat of hyperinflation.
Unemployment has reached intimidating levels, said Abdülkadir Konukoğlu, chairman of Sanko Holding, which operates in several areas including textile, construction, finance, energy, food, and information technology. "Despite the fact that money inflow may cause a rise in inflation, the market requires liquidity abundance, "he added.
"The market activity will affect factories. Inflation should not be feared. In the past, inflation used to increase even when the dollar’s value rose; however, there is no such taboo at present. The issue of rising inflation and whether it would cause crises should be evaluated separately if and when it happens." The government should act quickly to take relevant steps, according to Professor Taner Berksoy of Bahçeşehir University.
"With utmost control, money should be printed. A little easing in monetary policies would not harm anyone. The demand that would generate inflation is already dead," he said.
Rising unemployment is sitting on top of Turkey’s problems, said Ahmet Nazif Zorlu, chairman of Zorlu Holding, who demanded measures to activate industry. "Different instruments can be used in terms of monetary expansion. The Central Bank should take action quickly. It does not necessarily have to print money. Eximbank and export loans can be increased."
Tuncay Özilhan, chairman of Anadolu Holding, said it was a bit dangerous to create liquidity abundance and liberalize inflation. "If budgetary discipline is lost, we may have to wage another war against hyperinflation, just like we did in the past. Turkey struggled to decrease interest rates and inflation for 30 to 40 years. We adopted low interest-high rate policy, and got current account deficits under control. After such a struggle, it just would be so wrong to fall back into that very same situation," said Özilhan.
"A rise in domestic demand can be secured through printing money, but it would not be a cure for the problem," said Gazi Erçel, former governor of the Central Bank.
The tone of the discussion intensified especially after State Minister Nazım Ekren’s statements last week. The government, which began to implement a tight fiscal policy in 2004, has to take measures that are completely opposite of that this time around, he said. Then the business world announced that the "same taboos including monetary expansion could also be opened to discussion," signaling that printing money could soon become a part of the agenda.
The fear of inflation during this period is quite incongruous, according to the leaders of the business world and academics, who urge the implementation of careful monetary expansion.
Inflation a past issue
Inflation is no more a problem, according to some businessmen. And that situation must be assessed as an opportunity in the midst of this crisis climate, they said. In addition to cutting key interest rate Central Bank could also help ease distress in the market by printing money, businessmen added.
Monetary expansion is a good idea, but it must be discussed thoroughly and then implemented with accuracy, according to some other business people. This group of people highlight the importance of cautious approach, because they believe, although money flow eases the market, it also brings the possible threat of hyperinflation.
Unemployment has reached intimidating levels, said Abdülkadir Konukoğlu, chairman of Sanko Holding, which operates in several areas including textile, construction, finance, energy, food, and information technology. "Despite the fact that money inflow may cause a rise in inflation, the market requires liquidity abundance, "he added.
"The market activity will affect factories. Inflation should not be feared. In the past, inflation used to increase even when the dollar’s value rose; however, there is no such taboo at present. The issue of rising inflation and whether it would cause crises should be evaluated separately if and when it happens." The government should act quickly to take relevant steps, according to Professor Taner Berksoy of Bahçeşehir University.
"With utmost control, money should be printed. A little easing in monetary policies would not harm anyone. The demand that would generate inflation is already dead," he said.
Rising unemployment is sitting on top of Turkey’s problems, said Ahmet Nazif Zorlu, chairman of Zorlu Holding, who demanded measures to activate industry. "Different instruments can be used in terms of monetary expansion. The Central Bank should take action quickly. It does not necessarily have to print money. Eximbank and export loans can be increased."
Tuncay Özilhan, chairman of Anadolu Holding, said it was a bit dangerous to create liquidity abundance and liberalize inflation. "If budgetary discipline is lost, we may have to wage another war against hyperinflation, just like we did in the past. Turkey struggled to decrease interest rates and inflation for 30 to 40 years. We adopted low interest-high rate policy, and got current account deficits under control. After such a struggle, it just would be so wrong to fall back into that very same situation," said Özilhan.
"A rise in domestic demand can be secured through printing money, but it would not be a cure for the problem," said Gazi Erçel, former governor of the Central Bank.