KEY ISSUES Context: Economic activity has accelerated, in part thanks to pro-cyclical macroeconomic policies. With domestic demand stronger, the current account deficit is widening again from a high level, and inflation remains well above target. Challenges: On current policies, Turkey can only...

This Selected Issues paper analyzes the capital flows in Turkey. The empirical analysis in this paper uses exchange market pressure index to identify the determinants of capital flows to Turkey. It is observed that exchange market pressures in Turkey seem to a degree, larger than in other...

This report for the 2012 Article IV Consultation with Turkey discusses the macroeconomic conditions after the 2008 global financial crisis. After two years of rapid growth, the economy has slowed and imbalances are unwinding. However, owing to slower domestic demand, the Turkish financial system...

This Selected Issues paper on Turkey discusses the new monetary framework adopted by the Central Bank of Republic of Turkey (CBRT). Instead of relying on one interest rate as inflation-targeting, the CBRT resorted to raising it as inflation pressures intensify and lowering it as they abate. The...

KEY ISSUES Context: Turkey’s economy has grown on average by 6 percent annually since 2010, but this has come at the expense of a persistently large external deficit making the economy sensitive to changes in external financing conditions. Inflation is high and above the authorities’ target,...

This Selected Issues paper examines the external imbalance situation in Turkey. Turkey’s current account deficit is expected to remain elevated at about 5.5 to 6 percent of GDP through 2019. Reducing the deficit to a more sustainable level about 2.5 to 3 percent of GDP should be a key policy...