“Türkiye Modeli” - 2021 ve Sonrası: Rastgele hedefler, gerçekleşmeler ve bir bilanço

Abstract

After the initiation of the Central Bank's interest rate cut cycle in the autumn of 2021 the decline in the lira's value has triggered a rapid surge in both the inflation rate and inflation expectations. In December 2021, the lira entered a steep decline, which was only halted by a late-night announcement of Exchange Rate Protected Turkish Lira Denominated Deposit Accounts and later by a series of changes in banking regulations, aimed at curbing the increasing demand for foreign currency among residents. The government has defended these policies as a transition to a new economic model. In this paper, we will analyze the causes and consequences of this policy shift. We will demonstrate that Turkey's macroeconomic dynamics have long been influenced by the influx of foreign capital, which has resulted in the accumulation of vulnerabilities within the economy. Periods characterized by high global liquidity, such as 2002-2007 and 2010-2013, witnessed substantial inflows of foreign capital, leading to episodes of high growth, low inflation, and an overvalued exchange rate. Therefore, the policy framework implemented since the autumn of 2021 ought to be understood within this historical macroeconomic context. As to be expected, the outcome of this policy framework has significantly impacted the distribution of national income, resulting in a sharp decline in labor's share. We illustrate this and other macroeconomic consequences.