Macroeconomic Policies for EU Accession

Macroeconomic Policies for EU Accession

Edited by Erdem Başçı, Sübidey Togan and Jürgen von Hagen

What macroeconomic requirements must Turkey meet in its quest to accede to the European Union? This book, with its distinguished contributors – well-known economists and policymakers – examines and analyses these macroeconomic challenges confronting Turkey. Although the focus is on the specific situation of Turkey, the lessons are informative for other candidate countries and the findings directly relevant to the process of European integration.


Ricardo Hausmann

Subjects: economics and finance, financial economics and regulation


Ricardo Hausmann In ‘Monetary policy challenges for Turkey in the EU accession process’, Fatih Özatay explains Turkey’s fight against fiscal dominance and its impressive recovery thanks to its large primary fiscal surplus. The author goes on to explain the implementation of inflation targeting and its effects and challenges, and how to face up to a new period of monetary dominance in the context of large capital inflows and de-dollarization. This is excellent, and a ‘must read’ for anyone interested in the topic. The chapter mainly summarizes policies of the post-crisis period, and lays out future challenges facing Turkey during the first phase of the accession to European Union, that is, the candidacy period. The main emphasis is on fiscal dominance, and a simple model is developed to emphasize the importance of fiscal discipline and market expectations. I will first summarize the chapter and leave the discussion of the model to the end. The post-crisis policy actions include: large primary surpluses (6.5 per cent of GDP) and the associated decline in public sector deficit (from approximately 15 per cent to 7 per cent); movement away from foreign currency denominated (and indexed) and floating domestic debt stock; Central Bank instrumental independence; significant restructuring of state and problematic private sector banks; and other structural reforms such as the reforms of the agricultural support system. Monetary policy, in the meantime, has been ‘implicit inflation targeting’, so the goal of the Central Bank of Turkey (CBT) is to achieve...

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