Assalamu Alikum,
Thanks to all those that came and participated with us since the last week and their efforts are really much appreciated. I would like to say that we started something that is completely new in our department and the honor and achievement of doing it for the first time will be related back to us. We all deserve it and may Allah Help us in doing it to the end.
In this post, I concluded all the most valued comments that I believe were near to what we were looking for so as to continue working on them. I would be very happy if anyone refers me to any comment which I mistakenly skiped.
I hope that we now focus on just adding under this comments and enriching them with more valued comments and please, NEVER ADD INDICATORS AGAIN BECAUSE THEY ARE MUCH THAN WE NEED.
My Regards,
Anas Elshamy.
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The Economic Growth Report
A much valued comment was added by Mahmoud which contains the following:
s3 ,
In order to determine the standard growth rate for countries in the take-off stage we should search the net for the standard growth rate .And I tried to do so ,and unfortunately I didn’t find any :S ,
So the other option in my opinion is that we can read about each country’s economy and see if they lie or satisfy the conditions of the take-off stage or not. And start to know the average growth rate of those countries ( ex. 10 countries that lie in the take-off stage.)
And in order to do so we should know more about the take-off stage :Take-off occurs when there is a sector that leads growth becomes common and society is driven more by economic processes than traditions.
So the keyword here is “Transition” from tradition to economic processes .
we should also know the conditions of the take-off stage :
1: the first and essential condition for take off is a rise in the rate of productive investment from say five percent or less to over ten percent of national income. In other words the percentage rate of investment must be five or six times greater than the percentage increase in population.
2: The second condition for take off is the development of one or more leading sectors in the economy. According to Rostow, the rapid growth of the leading sector depends on the presence of four basic factors.
First: there must be an increase in the effective demand of their products.
Second: a new production function along with an expansion of capacity must be introduced into these sectors.
Third: there must be sufficient initial capital and investment profits for the take off in these leading sectors.
Lastly: these leading sectors must introduce expansion of output in other sectors through technical transformation.NOTE : https://www.cia.gov/library/publications/the-world-factbook/geos/ag.html#Econ
this link provides summarized details about countries economies ,hope it can help you.About countries that could be in the take-off stage :
1:_ALGERIA
Where the Algerian economy depends mostly in the hydrocarbon sector (satisfying the 2nd condition) trying to increase foreign and domestic investment in more than one sector (satisfying the 2nd condition ).
Algeria’s investment %of GDP is =24.5 % ,which is 20 times the rate of increase in population (i.e satisfying the 1st condition ).
It’s growth rate is 4.5 %..
2:_PERU..
PLEASE, CONTINUE FROM WHERE HE STOPPED AND DISCUSS IF HE MISSED ANYTHING.
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The External Debt Report
Anas added the following comment:
Some points that may be of value:
- For most countries, a country’s debt is deemed to be ‘unsustainable’ if the net present value of its total external debt is more than 150% of its average exports.
- For countries which are exceptionally open (with an export-to-GDP ratio of more than 30%) and with a very high debt in relation to fiscal revenues despite a relatively good revenue performance (above 15% of GDP) a debt to revenue criteria is applied. For these countries, the debt sustainability target is set so that the net present value of debt is at 250% of revenues at the decision point.
PLEASE, CONTINUE FROM WHERE HE STOPPED AND DISCUSS IF HE MISSED ANYTHING.
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The Balance Of Payments Report
A much valued comment was added by Abeer which contains the following:
definition of the balance of payments intended to measure a country’s ability to meet its obligation to exchange its currency for other currencies or for gold at fixed exchange rates. To meet this obligation, countries maintained a stock of official reserves, in the form of gold or foreign currencies, that they could use to support their own currencies. A decline in this stock was considered an important balance-of-payments deficit because it threatened the ability of the country to meet its obligations. But that particular kind of deficit, A country is more likely to have a deficit in its current account the higher its price level, the higher its gross national product, the higher its INTEREST RATES, the lower its barriers to imports, and the more attractive its investment opportunities—all compared with conditions in other countries—and the higher its exchange rate. The effects of a change in one of these factors on the current account balance cannot be predicted without considering the effect on the other causal factors. Contrary to the general perception, the existence of a current account deficit is not in itself a sign of bad economic policy or bad economic conditions. If the United States has a current account deficit, all this means is that the United States is importing capital. And importing capital is no more unnatural or dangerous than importing coffee. The deficit is a response to conditions in the country. It may be a response to excessive INFLATION, to low PRODUCTIVITY, or to inadequate SAVING. It may just as easily occur because investments in the United States are secure and profitable. Furthermore, the conditions to which the deficit responds may be good or bad and may be the results of good or bad policy; but if there is a problem, it is in the underlying conditions and not in the deficit per se.
PLEASE, CONTINUE FROM WHERE SHE STOPPED AND DISCUSS IF SHE MISSED ANYTHING.
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The inflation Report
Nothing yet was brought up although we talked much about Inflation!!!
Tags: Misc
26 November, 2008 at 7:50 pm
Definition of BOP:
Set of accounts that record a country’s international transactions, and which (because double entry bookkeeping is used) always balance out with no surplus or deficit shown on the overall basis. A surplus or deficit, however, can be shown in any of its three component accounts: (1) Current account, covers export and import of goods and services, (2) Capital account, covers investment inflows and outflows, and (3) Gold account, covers gold inflows and outflows. BOP accounting serves to highlight a country’s competitive strengths and weaknesses, and helps in achieving balanced economic-growth
26 November, 2008 at 7:59 pm
Def. of Economic growth :
is the increase in the amount of the goods and services produced by an economy over time. it is conventionally measured as the percent rate of increase in real gross domestic product or real GDP . Growth is usually calculated in real terms ,i.e, inflation adjusted terms , in order to net out the effect of inflation on the price of the goods and services produced. In economics, “economic growth” typically refers to growth of potential output, i.e, production at “full employment” which is caused by growth in aggregate demand or observed out put.
26 November, 2008 at 8:23 pm
inflation Definition
The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won’t be able to purchase as much with that dollar as he/she previously could. While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the Fed actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances. opposite of deflation
26 November, 2008 at 8:24 pm
External Debt
Money borrowed by a country from foreign (usually European, North American, or Japanese) lenders. Interest on this debt must be paid in the currency in which the loan was made. Thus the borrowing country may have to export its goods to the lender’s country to earn that currency. The infamous ‘debt crisis’ occurs when some weak economy is unable to do so, or can only do it at unacceptably high social and environmental costs.
http://www.businessdictionary.com/definition/external-debt.html
26 November, 2008 at 8:32 pm
Def Of Economic Growth:
process by which a nation’s wealth increase,
Economic growth is the real rate of growth in a country’s total output of goods and services,
(gauged by the gross domestic product adjusted for inflation, or “real GDP”). Other measures (e.g., national income per capita, consumption per capita) are also used. The rate of economic growth is influenced by natural resources, human resources, capital resources, and technological development in the economy along with institutional structure and stability. Other factors include the level of world economic activity and the terms of trade.
26 November, 2008 at 8:52 pm
Please read the following, very useful
OPTIMAL INFLATION RATE
Finding the optimal inflation rate ,based on Philips curve theory (although it has lots of criticisms but it make sense in determining the optimal inflation rate for each country)
As we all know that Philips curve describes the “trade-off “ between inflation and unemployment , whenever unemployment decreases inflation increases.
Also as Dr. HODA said today that for each country there is “natural rate of unemployment” it’s also known as “NAIRU ,Non-Accelerating Inflation Rate of Unemployment” ,where there is no country with full employment .
So the idea is whenever actual unemployment rate is less than the NAIRU for few years ,inflation will rise (causing non optimal inflation rate )
And whenever actual unemployment rate exceeds NAIRU for a few years ,inflation will tend to slow (causing disinflation ).
And whenever actual unemployment rate is equal to NAIRU ,in this case inflation rate will be “OPTIMAL”
So what we need is to get the natural unemployment rate for Egypt in order to determine the optimal inflation rate for Egypt …..
Further readings :
http://en.wikipedia.org/wiki/NAIRU
http://en.wikipedia.org/wiki/Philips_curve#The_price_Phillips_curves
http://findarticles.com/p/articles/mi_m1093/is_n1_v41/ai_20485329
26 November, 2008 at 8:52 pm
the inflation rate:
the rate of increase of a price index (for example, a consumer price index). The rate of decrease in the purchasing power of money is approximately equal.
price index:
If P0 is the current average price level and P − 1 is the price level a year ago, the rate of inflation during the year might be measured as follows:
inflation rate = p0 -p_1
_________ x 100
p-1
After the year the purchasing power of a unit of money is multiplied by a factor 1 / ( 1 + inflation rate/100 ).
There are other ways of defining the inflation rate, such as logP0 − logP − 1 (using the natural log), again stated as a percentage. In this case after the year the purchasing power of a unit of money is multiplied by a factor e − inflation rate.
Methods of controlling inflation:
1.Monetary policy.
2.Fixed exchange rate.
3.Gold standard.
4. wage and price controls.
CPI as akey indicator of inflation:
annual CPI inflation increased to16.4% during april 2008 compared to 14.4% in the previous month and 11.6% last year .the average inflation rate since the beginning of the fiscal year 2007/08 is 10% compared to 11.3% during the same period in 2006/07 with respect to the External sector annual data shows that the balance of payments surplus (4.1% of GDP)reached almost US$ 5.3 billion during 2006/07, notably higher than surplus realized during 2005/06 of almost US$ 3.3 billion , driven by un precedented increases in foreign direct investment (net), non -oil exports and private transfers reaching US$ 11.1,11.9 and 6.3 billion respectively .
current account reciepts ( including official transfers ) continued to outperform current payments bringing the ratio of reciepts to payments to 105.8 % compared to 104.4% in the previous year . Moreover,net international reserves (NIR)-imports coverage ratio increased slightly to 9.1 months compared to 9 months in the previous year . On the other hand ,the coverage ratio of commodity exports to imports decreased to 58.2% compared to 60.6% during FY 2005/06 .
26 November, 2008 at 9:28 pm
External debt:
is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the IMF and World Bank.
standard of external debt:
its deemed to be unsustainable if the net present value more than 150%of exports.
for the open countries export to GDP ratio of more than 30%. very high debt in relation to fiscal revenues criteria is applied ,the debt target is set so that the net oresent value of debt is 250% of revenues at the decision point.
the key elements of external debt :
(a) Outstanding and Actual Current Liabilities:
(b) Principal and Interest:
(c) Residence:
(d) Current and Not Contingen.
Generally external debt is classified into four heads
(1) public and publicly guaranteed debt.
(2) private non-guaranteed credits
(3) central bank deposits.
(4) loans due to IMF.
Egypt maintains this four head classification ,in India it is classified in seven heads :
(a) multilateral.
(b) bilateral
(c) IMF loans
(d) Trade Credit
(e) Commercial Borrowings
(f) NRI Deposits
(g) Rupee Debt.
(h) NPR Debt.
{External debt statistics as of end december 2007 reveal an increase in foreign public debt by 13.4% to some US$32.8 billion (20.8%of GDP) a year earlier . in general, foreign debt composition remains quite favorable with only US$2.2billion (6.8%of total foreign debt) of short tertm maturity also gross government external debt accounts for US$21.3billion (64.7%of total foreign debt ) .
this site includes scheduale for external debt in Egypt:
http://cbe.org.eg/External%20Debt%20Statistics_SDDS.
26 November, 2008 at 9:45 pm
Economic growth
Economic index is yielding good results : the actual growth rate has soared 5.6% ,investment rate has also increased to 13.2% and the GDP to 5.9%.
*total budget deficit has droped by 1.6%to 50.8 billion pounds while tax revenue reached 97.1 billion pounds ,
customs have registered 9.4 billion pounds or 21% increase while other revenues have reached 49 billion pounds.
the ministry of finance declared the launch of plan to reduce budget deficit where local central government debts has soared to 374 billion pounds while foreign debt has dropped to 28.9 billion dollars at a rate of 4.3%
the bank deposite have soared to 564 billion pounds including 85% non government deposites .
Deposit loans have not exceeded 59% and export goods have increased by 38% to reach 13.5 billion dollars.
the leading sectors in the Economy:For the first half of 2007/08,GDP at factor cost realized real growth of 7.5 percent.it is noteworthy that :
tourism (4.2% of GDP , 28.9% growth)
suez canal (4.4% of GDP , 18.3% growth)
construction (4.7% of GDP ,15.6% growth)
telecommunication (3.4% of GDP ,15.6% growth)
these are the sectors that has the prime driving engines for the robust growth realized during july -december 2007/08.
26 November, 2008 at 10:35 pm
Assalamu Alikum,
I got this definition for the external debts problem from wikipedia:
“External debt” is defined as the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services .
Does anyone have a better definition?
Also, I got the following information from this link http://www.idsc.gov.eg/nds/nds.aspx
On June 30th, 2007
Egypt’s External Debt: $29.9 Billion Dollars
Rank Globally: 61
External Debt Per Capita i.e. Share of each citizen: $1,084
External debt (% of GDP): 23.3 %
External Debt service as a percentage of service & commodity exports receipts (%) : 6.9 %
26 November, 2008 at 10:36 pm
Dear Group, Please have a look at this link to understand External Debt:
http://en.wikipedia.org/wiki/Foreign_debt
These are some points I summarized from the article:
* External debt (or foreign debt) is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the IMF and World Bank.
* Generally external debt is classified into four heads i.e. (1) public and publicly guaranteed debt, (2) private non-guaranteed credits, (3) central bank deposits, and (4) loans due to the IMF. However the exact treatment varies from country to country. For example, while Egypt maintains this four head classification, in India it is classified in seven heads i.e. (a) multilateral, (b) bilateral, (c) IMF loans, (d) Trade Credit, (e) Commercial Borrowings, (f) NRI Deposits,and (g) Rupee Debt. (h) NPR Debt.
* External Debt Sustainability: World Bank and IMF hold that “a country can be said to achieve external debt sustainability if it can meet its current and future external debt service obligations in full, without recourse to debt rescheduling or the accumulation of arrears and without compromising growth.
* High external debt is believed to have deliterous effects on an economy.
* Indicators of External Debt Sustainability: There are various indicators for determining a sustainable level of external debt.
These indicators can be thought of as measures of the country’s “solvency” in that they consider the stock of debt at certain time in relation to the country’s ability to generate resources to repay the outstanding balance.
Examples of debt burden indicators include the (a) debt to GDP ratio, (b) foreign debt to exports ratio, (c) government debt to current fiscal revenue ratio etc.
Another set of indicators focuses on the short-term liquidity requirements of the country with respect to its debt service obligations. These indicators are not only useful early-warning signs of debt service problems, but also highlight the impact of the inter-temporal trade-offs arising from past borrowing decisions. Examples of liquidity monitoring indicators include the (a) debt service to GDP ratio, (b) foreign debt service to exports ratio, (c) government debt service to current fiscal revenue ratio etc.
26 November, 2008 at 10:56 pm
Abeer Added:
what are the main principles and characteristics that are essential or desirable for a country’s balance of payments, and the second: Taking a very long view, extending from the 1930s to 1998, what kind of macroeconomic changes will be found to have occurred in Turkey’s balance of payments? I would like to describe what I see from this very long-term perspective.
Now for the three main points to be made about the characteristics sought in a balance of payments. The first essential characteristic is scope. Because the people in the real economy, the financial sector, or residing in the country have economic relationships with persons abroad, the balance of payments consists of myriad transactions that result in transfers out of the country or inflows into the real or financial sectors. It is essential for the scope of data collection to be large enough to capture all these kinds of transactions.
A second essential is transparency. Both the data on which it is based and the figures used in constructing the balance of payments must be transparent, and their transparency should be achieved in ways that put it beyond any question.
Third, because the balance of payments is an internationally defined concept, the compilation of the balance of payments, and the evaluation of its significance and consequences, must be consistent with international criteria so that one country’s balance of payments can be seen in its true relation to the balance of payments of other countries.
When we look at Turkey in the light of these three criteria, I think we will find that the Central Bank of the Republic of Turkey has made significant progress since 1975, especially in the compilation of raw data and the presentation of data related to the balance of payments.
I am one who watched the last years of the 1970s and the first years of the 1980s from the vantage point of the Treasury and the Ministry of Finance. The balance of payments was certainly an issue of great importance then. When I look back from where we are today to the days of the great effort that had to be made to calculate Turkey’s debt in 1978-1979 from external sources, I can see that we have made great progress with respect to coverage. Clearly our coverage can still be improved and refined. We still have some homework to finish, and we are working on it. But I can say that today, Turkey’s balance of payments presents the data which ought to be in a balance of payments statement within the present framework.
What we understand as transparency includes a comprehensible account of the items in the balance of payments called “other items” and “net errors and omissions.” In other words, all the data in the balance of payments statement, including where or how the underlying figures were obtained or derived, must be known and interpreted. Certainly there are still some problems with Turkey’s balance of payments, which we are trying to solve, but a look at the figures and data associated with “net errors and omissions” shows this item to be quite small in terms of the global magnitude of the balance of payments.
The third criterion, which is that the compilation of a balance of payments should be consistent with international standards, dates from the early 1980s. At that time we had a friend working at the International Monetary Fund named Baydar Gürgen. He has since retired, and still lives in Washington. I remember him. Ensuring the consistency of countries’ balance of payments with the international standards is in a way a responsibility of the International Monetary Fund. Mr. Gürgen came to Turkey at the beginning of the 1980s to assist Turkey to meet the international standards. Beginning with his first visit, and during periodic subsequent visits on business, he made very valuable contributions to giving Turkey’s balance of payments its international dimension. By working to adapt to the international standards since the beginning of 1980, I can say that through the 1990s and now in 1998, we have reached a point where we have no problems in complying with the international standards.
Having described what a balance of payments should be in terms of coverage, I would like to see how Turkey’s actual balance of payments has measured up in the past. From this standpoint we can distinguish four separate historical periods. For the 1930s we have a balance of payments record, but we cannot consider the balance of payments separately from economic policy because it was the economic policies of the state that shaped the balance of payments, and the balance of payments merely reflected statist economic policies. In those years, international transactions, particularly export-import transactions, were mainly conducted by bilateral agreements. There were two important principles. One of them was the principle, established in the 1930s, the Turkey would import only from countries that purchased our exports; the other was the principle that no goods would be imported that were domestically produced. These limitations were certainly reflected by the balance of payments during the 1930s and even the 1940s. There were the war years, of course, and World War Two had significant effects. The quite modest depth of world capital markets also required trade to be financed very differently from today.
In the second period, after the beginning of the 1950s, the demand for imported goods began to grow faster and this acceleration is reflected in the balance of payments. The increase in imports was accompanied by a shift in their composition: an increase in the share of consumer goods is seen in the 1950s and 1960s. Of Turkey’s total imports in 1950, 46 percent were investment goods, 21 percent were consumer goods, and 33 percent were raw materials. By 1970, the share of investment goods has changed little, from 46 percent to 47 percent; but the share of consumer goods has decreased from 21 percent to 5 percent, and the share of raw materials has have increased to 48 percent. The annual balance of payments for the 1950s and 1960s reflect these changes.
During the third period, dominated as we all know by the development programs of the 1960s and 1980s, economic policies under the development plans were based mainly on import substitution. The “imports” item continued to increase during this period, which led to the external payment difficulties of the 1970s. This spelled the end both of prices determined by the self-correcting mechanism of the market, and the principle of one way, one price; and brings us to the 1980s.
The changes made during the 1980s in Turkey’s economic policies are again reflected in the balance of payments. One of the things reflected is the effort of the economy to obtain badly needed foreign currency while implementing a stabilization program. In addition, the various structural measures undertaken during the 1980s have caused the orientation of Turkey’s foreign balance of payments to vary as well. As Turkey passes from import substitution to an export-based, outward-looking economic policy, we naturally see an acceleration of export growth. The effect on the sectoral distribution is especially striking. Maybe all of us know the figures, but that is not reason not to repeat them.
From a balance of payments in which agriculture dominated exports with a 93 percent share in the 1950s, we see this share decline to 18 percent in 1990 and to 10 percent in 1995. Industry’s share in the balance of payments was 1.4 percent in the 1950s. This share rises to 18 percent in the 1970s, to 86.6 percent in 1996, and approximately 87 percent in 1997. During all these periods, Turkey’s various economic policies, both inward- and outward-looking, are reflected in our balance of payments. The clearest reflection is in the financing items, which as you know become visible in the balance of payments only after the current transactions have been figured out.
Going back to the 1980s, and I will go back no further, and looking at the financing items, we see that long-term funds flowing to the state, mostly raised by government bonds, were gaining importance in financing the balance of payments. Since 1990, and especially in 1994, 1995, and 1996, and again in parallel with economic developments, long-term capital flows were being replaced by short-term capital movements, in line with the trend in the global financial markets. Since this shift in structure is also convenient in terms of our economic policies, short-term capital movements have begun to assume a significant role. There are also portfolio investments, the item designating both the sums Treasury has raised from the international financial markets by issuing bonds, and the inflow of funds parallelling the development of the İstanbul Stock Exchange. This also amounts to a structural change.
Dividing the period between the 1950s and 1997 into two periods, from 1950 to 1984, and from 1984 to 1997, clarifies the picture with respect to the current account deficit. First let me point out that except for two significant periods of crisis, in the last years of the 1970s and in 1994 (I omit the crisis connected with Iraq in 1991), the ratio of Turkey’s current account deficit to GNP has not fluctuated much and has consistently been lower than the international average or the figures obtained by similar countries. When we look at the figures between 1950 and 1984, a period when market mechanisms did not operate and when there were no significant structural changes, we find that the current account deficit in terms of GNP averaged 1.7 percent, higher than the figure for the period 1984-1997 that I will mention shortly.
The 1980s saw the emergence of movements which by mid-decade had deregulated exports and imports and the current account balance in the real economy, and the liberalization of capital movements at the beginning of the 1990s. It can be seen that these changes have caused current account deficits to decrease on the average.
The conclusion we may draw is that, the more we deregulate the items related to current transactions, and the more we liberalize capital movements, the smaller will be the ratio of our current transactions deficit to gross national product. This was one of Turkey’s most significant structural changes. The Turkish liberalization of capital movements starting at the beginning of the 1990s was the topic most discussed in the international financial organizations up until the Asian Crisis. There were several debates on the liberalization of capital movements in the various committees of the IMF. Because many countries in the world were less liberal than Turkey in their treatment of capital movements, the IMF was inclined to the belief that the world economy would improve as the liberalization of capital movements became more widespread. However, liberalization in a global framework began to look different after the Asian crisis. Even the IMF was affected, dropping the issue from its agenda and beginning to downplay its significance. The Asian crisis has provided much food for thought concerning today’s highly globalized financial world, and changed the IMF’s position on the issue. It is now their view that had there not been such a huge liberalization and such large short-term capital flows, the reversal of the flows would not have occurred and the crisis would have been neither so deep nor its consequences so painful.
From Turkey’s viewpoint, this may be interpreted in several ways. When we look at the figures, we find that the extent to which we liberalize both current transactions and capital movements affects the rate at which the GNP ratio of our current account deficit declines. In fact, this reflection is a structural characteristic of Turkish economy, and as such is one of the structural beauties of Turkey.
Here I would like to open a parenthesis. The debate about whether liberalization should begin with current transactions or with the trade balance; and in the latter case, whether it should begin with imports-exports or with the invisibles or with capital movements, goes back practically to the 1920s. It began in Turkey in the 1930s but took a long time to arrive at anything like a conclusion. Thus it was that liberalization began in the 1980s first in the trade balance, exports and imports, and then was reflected in the invisibles. Ten years later, in the 1990s, liberalization reached the capital movements. As a matter of fact, when you look at this it is seen to be a correct model. When we examine the figures, the correctness of the model of a liberalization movement that begins with the trade balance, then the invisibles, and then the capital movements, certainly with the support of other measures that reinforce and develop the structure of the economy, becomes obvious.
I would like to touch briefly on foreign exchange policy, knowing that my colleagues, the panellists, and the other speakers will discuss this in greater detail. But foreign exchange policy offers me a way of summarizing what I have said.
Which is, that as regards the three main necessary qualities of a balance of payments with which I began, coverage, transparency, and consistency with international standards, Turkey has made good progress, despite some deficiencies that we in the Central Bank and other concerned ministries and foundations are working to eliminate. We have no reservations as regards transparency. If there are some items that are not transparent, if we have a problem with data collection or not being able, for various reasons, to obtain much more detailed information from certain sections of the economy, we are working to resolve the problems as far as possible. In terms of these three standards, Turkey has made great progress, and we will continue to work on these issues. Beyond this, I believe that Turkey’s response to the evolution of the balance of payments in this century has been very sound in spite of the two crises already mentioned.
26 November, 2008 at 10:57 pm
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08f
Nominal GDP at Market Prices ($bn)*
93.1 84.0 69.3 78 93 108.4 128.1 149.7*
Real GDP Growth (%) 3.4 3.2 3.2 4.1 4.5 6.8 7.1 7.3*
Population (mn)*** 64.7 66 67.3 68.6 70 71.3 72.7 78.3**
Real GDP Per Capita ($) 1,285 1,273 963 1,036 1,323 1,520 1,762 1,806**
Share of Private Sector in GDP 70.7 65.4 64.9 62.2 62.3 62.9 62.3 –
Unemployment (%) 9.2 9 10.5 11.1 10.5 10.9 9.1 -
26 November, 2008 at 10:59 pm
GDP at Market Price 2008: 149.7
Real GDP Growth 2008: 7.3 %
Real GDP Per Capita2008: 1,806
26 November, 2008 at 10:59 pm
Merit Added:
WHAT CAUSES THE CURRENT-ACCOUNT DEFICIT?
According to the second accounting identity, changing the current-account balance requires changing saving, investment, or both. Events in the trade sector of the magnitude normally encountered have no significant, sustained effects on aggregate saving or investment. Such events include reduced demand for U.S. exports as a result of recessions in foreign markets, the trade policies of U.S. trading partners (even large partners such as Japan, Canada, Mexico, China, or the European Union), or any U.S. trade policy other than severe restrictions on all or almost all imports.
Such events can cause temporary, unintended changes. For example, an exporter whose sales to a foreign market unexpectedly decline when that market goes into recession may be left with an unintended excess of inventory (a form of investment). But once all economic actors bring their saving and investment back in line with their intentions, total saving and investment return to their previous levels (other things being equal). Consequently, such events normally cause no more than temporary deviations of the current-account balance (perhaps a few months to a couple of years) from its long-term level. That level is determined primarily in international capital markets by the relative demands for and supplies of investment capital among countries.
26 November, 2008 at 11:01 pm
Merit Added:
Economic impact
Modern economists are split on the economic impact of the trade deficit.
Trade deficit considered harmful
Some economists believe that GDP and employment[1][2] can be dragged down by an over-large deficit over the long run.[3][4]
Those who ignore the effects of long run trade deficits may be confusing David Ricardo’s principle of comparative advantage with Adam Smith’s principle of absolute advantage, specifically ignoring that latter. The economist Paul Craig Roberts notes that the comparative advantage principles developed by David Ricardo do not hold where the factors of production are internationally mobile.[5] [6] Free trade concepts presume free floating currencies; however, in the real world, currencies such as China’s are not free floating, while others may be manipulated by governments.
Since the stagflation of the 1970s, the U.S. economy has been characterized by slower GDP growth. In 1985, the U.S. began its growing trade deficit with China. Over the long run, nations with trade surpluses tend also to have a savings surplus while the U.S. has been plagued by persistently lower savings rates than its trading partners which tend to have trade surpluses with the U.S. Germany, France, Japan, and Canada have maintained higher savings rates than the U.S. over the long run. In 2006, the primary economic concerns have centered around: high national debt ($9 trillion), high non-bank corporate debt ($9 trillion), high mortgage debt ($9 trillion), high financial institution debt ($12 trillion), high unfunded Medicare liability ($30 trillion), high unfunded Social Security liability ($12 trillion), high external debt (amount owed to foreign lenders) and a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP),[7] high trade deficits, and a rise in illegal immigration.[8][9] These issues have raised concerns among economists and unfunded liabilities were mentioned as a serious problem facing the United States in the President’s 2006 State of the Union address.[citation needed]
Trade deficit is not significant
Those who defend this position refer to explanations of comparative advantage. Buyers in the receiving country send the money back. A firm in America sends dollars for Brazilian sugarcane, and the Brazilian receivers use the money to buy stock in an American company. This may lead to profits leaving the U.S however as Americans may forfeit control. Although this is a form of capital account reinvestment, it may not be a liability on anyone in America.
Such payments to foreigners have intergenerational effects: by shifting the consumption schedule over time, some generations may gain and others lose [10]. However, a trade deficit may incur consumption in the future if it is financed by profitable domestic investment, in excess of that paid on the net foreign debts. Similarly, an excess on the current account shifts consumption to future generations, unless it raises the value of the currency, detering foreign investment.
However, trade inequalities are not natural given differences in productivity and consumption preferences. Trade deficits have often been associated with international competitiveness. Trade surpluses have been associated with policies that skew a country’s activity towards externalities, resulting in lower standards. An example of an economy which has had a positive balance of trade was Japan in the 1990s.
Milton Friedman and Dewly Tiwana argued that trade deficits are not important as high exports raise the value of the currency, reducing aforementioned exports, and visa versa for imports, thus naturally removing trade deficits not due to investment. This opinion is shared by David Friedman, who has said that they are ‘fossil economics’, based on ideas obsolete since David Ricardo.[11]
26 November, 2008 at 11:10 pm
Most policy makers agree they shouid not allow inflation to fall below zero because the costs of deflation are thought to be high.
One reason for keeping inflation above zero stema from the fact that nominal interest rates cannot fall below zero.
Knowing what inflation rate to aim for is also critically important because many central banks have adopted formal nimerical inflation objectives over the last couple of decades , setting an appropriate target for inflation requires understanding how alternative inflation objectives impact economic stability and overall economic well being .
Ideally, policy makers should aim for an inflation rate that maximizes the economic well being of the public , unfortunately ,rigorous estimates of such an “optimal inflation rate” have not been available in the economics literature.
1- The optimal inflation rate might be some what above zero.
2- Examines the relationship between alternative inflation objectives and macroeconomic stability , showing quantitatively how the likelihood of hitting the zero nominal interest rate bound is higher for lower inflation objectives.
The optimal inflation rate might be low and positive.
there is a wide spread agreement among the public,economists and policy makers that inflation is bad for the economy.
a- inflation should be low because inflation is costly ,it arbitrarily benefits debtors and hurts creditors by decreasing the nominal value of outstanding debt. It discourages saving and investment by creating uncertainty about future prices.
b- inflation should be above zero because negative inflation rate (deflation) could be even more costly than a similar rate of inflation .
The direct estimate of the optimal inflation rate, it only identifies the trade off they face between the inflation objective and macroeconomic stability . policy makers does not provide a method for choosing which inflation rate to target.
26 November, 2008 at 11:15 pm
percentage change in Consumer Price Index (CPi)
20.2 30/10/2008
21.5 30/09/2008
23.6 31/08/2008
22 31/07/2008
20.2 30/06/2008
19.7 31/05/2008
16.4 30/04/2008
14.4 31/03/2008
12.1 29/02/2008
10.5 31/01/2008
6.9 31/12/2007
6.9 30/11/2007
7.5 31/10/2007
9.3 30/09/2007
8.2 31/08/2007
26 November, 2008 at 11:17 pm
some importanat & active indicators for measuring the inflation in the economy…..
REAL ECONOMY
(Updated Annually. Next update January 2009)
Historical data
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08f
Nominal GDP at Market Prices ($bn)*
93.1 84.0 69.3 78 93 108.4 128.1 149.7*
Real GDP Growth (%) 3.4 3.2 3.2 4.1 4.5 6.8 7.1 7.3*
Population (mn)*** 64.7 66 67.3 68.6 70 71.3 72.7 78.3**
Real GDP Per Capita ($) 1,285 1,273 963 1,036 1,323 1,520 1,762 1,806**
Share of Private Sector in GDP 70.7 65.4 64.9 62.2 62.3 62.9 62.3 –
Unemployment (%) 9.2 9 10.5 11.1 10.5 10.9 9.1 –
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1 December, 2008 at 11:56 pm
http://www.world bank.com [Egypt balance of payment surplus $4.9b] Gdp in e gypt ; ( Egypt Economy 2008) Standars of balance of payment ( Bop wikipedia)
Time theories of Real rate of inflation // wikipedia -free encyclpedia