Turkey, you were doing so well!

An economic success story runs off the rails.

In 2014, I got a call from a reporter in Turkey. She wanted to talk about a blog post I had written, called “The Neo-Fisherite Rebellion”. In that post, I talked about a few macroeconomists who were toying with the idea that low interest rates — which most people think encourage higher inflation — might actually reduce inflation. She told me she was interested because Turkish President Recep Tayyip Erdogan and his administration had been advancing this idea, and were looking for support from economists. When I told her that Neo-Fisherism is probably wrong, and that low rates probably do encourage inflation after all, she seemed disappointed.

Now the whole country has reason to be disappointed. Again and again throughout his tenure in office — first as Prime Minster since 2003 and now as President since 2014 — Erdogan has relentlessly campaigned for low interest rates. When the central bank would raise rates (e.g. to stem the currency crisis in 2018), Erdogan would pressure them to drive rates down again. Here, via Trading Economics, is a history of the central bank’s one-week repo rate:

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Πηγή: noahpinion.substack.com

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