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Unformatted text preview: TURKEY 2001-2004: IMF Strangulation, Tightening Debt Trap, and Lopsided Recovery 1 June, 2004 Erinc Yeldan , Professor of Economics, Department of Economics, Bilkent University, 06800, Ankara, Turkey [email protected] http://www.bilkent.edu.tr/ ~ yeldane The 21 st century witnessed the Turkish economy in a path just depicted as in the above title: strangulation by the neoliberal orthodoxy, orchestrated by the IMF; tightening of the debt trap and virtual collapse of the public sector to provide any social services to the people; and a lopsided recovery with a fast rate of growth and falling inflation amidst rising unemployment, declining real wages, and increased social exclusion and mass poverty. Turkey experienced a very severe economic and political crisis in November 2000 and again in February 2001. The IMF has been involved with the macro management of the Turkish economy both prior to and after the November and February crises, and provided financial assistance of $20.6 billions, net, between 1999 and 2002. In this brief report, I will try to provide an assessment of the key macroeconomic developments in Turkey over the post-2001 crisis period. 2 In so doing, I will try to investigate, in particular, the (slippery) sources of the (speculative-led) growth, and also highlight the main indicators of culminating fiscal and financial fragility. I will also try to comment on the role of the IMF in implementing its new two-fold orthodox dogmas, viz. inflation targeting by an independent central bank and primary surplus targeting by the public finance administration. I will also analyze the true nature of the so-called façade of expansionary “fiscal contraction”, i.e. that attaining primary surplus targets will generate a crowding-out process in reverse , leading to expansion of private demand, hence output. 1 I am indebted to Cem Somel and Ş aziye Gazio ğ lu, and to colleagues at Bilkent and at the Independent Social Scientists Alliance of Turkey for their comments and suggestions on an earlier draft of this paper. Needless to mention, none of them bear responsibility on the views and opinions forwarded in the text. 2 A collection of papers on the evolution of the 2001 crisis along with some key references are provided in my web page: http://www.bilkent.edu.tr/~yeldane/crisis.html for the interested reader. 1 I will organize my observations under five sections. First, I provide a broad overview of the recent macroeconomic developments in Turkey. Then I report and study data on Turkish debt dynamics and on the intricacies of the IMF program. In section three I study the evolution of the key macroeconomic prices such as the exchange rate, the interest rate and price inflation....
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This note was uploaded on 04/26/2010 for the course ECON 45568 taught by Professor George during the Spring '10 term at Aarhus Universitet.
- Spring '10