Manfred J.M. Neumann Sübidey Togan and Hasan Ersel are to be complimented for providing us with a very informative study of Turkey’s balance of payments problems and the implications of an attempt at reducing the current account deﬁcit by devaluing the Turkish lira. The authors show that Turkey’s current account has deteriorated during recent years while the lira has appreciated in real terms. They argue that the present state of the current account is not sustainable but needs correction. Consequently, they propose to devalue the lira by a sizeable margin and to this end to abandon the current system of an independent ﬂoat in favour of a managed ﬂoat or alternatively a crawling exchange rate band. To be sure, this is a strong policy message that requires careful evaluation. In this comment I will ﬁrst use a few economic indicators in order to characterize the macroeconomic developments of the 1990s and the current state of aﬀairs; next I will discuss the authors’ analysis of current account sustainability and the issue of the controllability of the real exchange rate; and ﬁnally I will draw a few policy conclusions. On my reading of the data, I am not convinced that a major change of exchange rate policy is advisable. 9C.1 Macroeconomic Assessment The main macroeconomic characteristics of the Turkish economy can be read from Table 9C.1 where the ﬁrst column summarizes the average performance of the 1990s up to 1998 and the additional columns provide more detailed information on...
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