Portugal to Demonstrate “Greek Symptoms”

While Greece is being rescued by the “United European Forces” economists raise other concerns about other EU country, signaling that Portugal is the number one candidate to be the “Next Greece”.

In spite of the fact that governing council of European Central Bank, speaking after the last week meeting, said “the recent three-year long-term refinancing operation (LTROs) had been an unquestionable success and had removed tail risk from the environment”, quantitative analysis of some experts points to the existence of “tail risk”. Namely, 2% rise of 10-year borrowing costs might be regarded as initial symptoms of unpleasant future. Having sovereign date of 102.7% of GDP in 2011 makes it harder for Portugal to avoid 2^nd bail-out. Furthermore, Citi analysts argue that for clearing its fiscal path Portugal has to undertake around 50% haircut in the form a reduction in the debt held by the private sector.  

reed more 

Read More

An Estimated DSGE Model For Turkey With A Monetary Regime Change

Abstract

Using of developments of the last decade in Bayesian estimation, I estimate a small open economy Dynamic Stochastic General Equilibrium (DSGE) model for Turkey. The thesis explicitly accounts for a monetary regime change from an exchange rate targeting to an explicit inflation targeting with a flexible exchange rate. In both regimes, I investigate the behavior of the monetary authority and the main driving forces of business cycles of key macro economy variables of the Turkish economy. My results can be summarized as follows. Monetary policy focused on the stabilizing of the nominal exchange rate in the exchange rate targeting regime. But, it is mainly concerned with the price stability in the inflation targeting regime. Monetary policy shocks were the main sources of the fluctuations under both regimes. However, the foreign output shock in the first regime and the real exchange rate shock in the second regime appeared as the additional sources of the fluctuations in the business cycles. The Central Bank of Turkey managed to neutralize inflationary shocks and achieved stability in output and consumption after the regime change.

Keywords: Turkey, Bayesian estimation, DSGE models, regime change


You can obtain the research from Grin Publishing 

Read More

“Capitalism! Capitalism is an alternative to what we have now. I highly recommend it.”

Federal Reserve considers buying new type of bond-buying in order to subdue worries about future inflation.  The aim of the program is to neutralize fears stemmed from the possibility that FED money printing to aid recovery may fuel inflation. The Wall Street journal reports that the plan will progress according to the following scenario: FED will print money to buy long-term mortgage or Treasury bonds, but immediately will borrow back the money for short-periods at low rates. But there are many critics against this “sterilized” quantitative easing.  For instance Jim Grant describes the new policy as “manipulation the value of the currency”.  He mentions that repressing interest rates puts the economy on more risky position.  Grant’s take can be categorized under three items:

·        Unintended Consequences could be harmful & Unbalanced

·        FED should learn from 1920-1921 Depression

·        U.S. Policymakers are Prolonging Symptoms of Recession

Maria Bartiromo: “What are the alternatives?”

Jim Grant: “Capitalism! Capitalism is an alternative to what we have now. I highly recommend it.”

Read More