new how do capital flows challenge monetary policy in … · 2014. 9. 24. · 1 october, 2011...
TRANSCRIPT
1
October, 2011
Warsaw
HOW DO CAPITAL FLOWS CHALLENGE
MONETARY POLICY IN CESEE?
Erdem Başçı
Governor
Contents
2
I. Global Monetary Expansion
II. Price Stability
III. Financial Stability
IV. External Balance
I. Global Monetary Expansion
II. Price Stability
III. Financial Stability
IV. External Balance
3
Large-Scale Asset Purchases
1. Large-Scale Asset Purchase Programs (LSAPP): FED and BoE
2. Unprogrammed Large-Scale Asset Purchases (ULSAP):
ECB, BoJ, SNB
Global Monetary Expansion
4
0
200
400
600
800
1000
1200
1400
1600
1800
0
200
400
600
800
1000
1200
1400
1600
1800
Official Liquidity (US)
Source: FED, CBRT.
(Billion USD)
Excess Reserves
Currency in Circulation
5
0
50
100
150
200
250
300
350
400
450
500
500
550
600
650
700
750
800
850
900
Official Liquidity (Eurozone)
Source: ECB, CBRT. *Excess Reserves=ECB Balance Sheet Deposit Facility + Fixed Term Deposits
Excess Reserves* (RHS)
Currency in Circulation
(Billion Euro)
6
-20
-10
0
10
20
30
40
50
60
-20
-10
0
10
20
30
40
50
60
Official Liquidity (Turkey)
Source: CBRT. * Excess Reserves =Sterilization through ON Borrowing + Banking Sector Free Deposit - Banking Sector Required Reserves
(Billion TL)
7
Excess Reserves*
Currency in Circulation
Source: TurkStat, CBRT.
* Reported M2 excludes foreign currency deposits.
Private Liquidity (Turkey)
0
2
4
6
8
10
12
14
16
18 ∆M2*
GDP
(Percent)
8
Annual Change in Money Supply
I. Global Monetary Expansion
II. Price Stability
III. Financial Stability
IV. External Balance
9
Employment
Source: WEO, Turkstat, CBRT. *Difference of natural logarithms.
Annual Average Employment Growth* (2007-2010)
-5
-4
-3
-2
-1
0
1
2
3
4
5
-5
-4
-3
-2
-1
0
1
2
3
4
5
(Percent)
10
Potential Output: Capital and Labor
50
60
70
80
90
100
110
120
130
Labor market participation rate* (percent)
Source: TURKSTAT, CBRT.
*Seasonally adjusted.
Capital Stock (constant prices, natural logarithm, 2008=100)
Source: TURKSTAT, CBRT.
Trend
Capital Stock
11
45
46
47
48
49
50
51
The Policy Mix
Policy Dimension Current Stance
1. Policy Rate Accommodative
2. Liquidity Policy Non-Accommodative
3. Financial Sector Policy Non-Accommodative
Net Policy Stance Non-Accommodative
12
The Policy Mix
CBRT Policy Rate TL Reserve Requirement Ratios (RRR)
Source: CBRT.
0
5
10
15
20
25O/N Lending - Borrowing Interest Rate Corridor
1- week Repo Rate
Adoption of 1-week repo rate as the policy rate
Source: CBRT.
13
0
2
4
6
8
10
12
14
16
18
The range of RRR
Weighted average RRR
16,3
16,4
16,5
16,6
16,7
16,8
16,9
17
17,1
17,2
17,3
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Gross Domestic Product
Actual and Trend GDP (natural logarithm, seasonally adjusted)
14
GDP
Trend
Source: CBRT.
0
5
10
15
20
25
30
0
5
10
15
20
25
30
Inflation in Turkey and EMs
Turkey
EM Average
Source: CBRT and Bloomberg. Average of EM countries: Brazil, Mexico, Czech Rep., Hungary, Poland, S. Africa, China, India, Russia. 15
(Percent)
Inflation Forecasts and Realizations
Source: CBRT. * Shaded region indicates the 70 percent confidence interval for the forecast.
16
0
2
4
6
8
10
12
Perc
ent
Forecast Range* Uncertainty Band Actual Inflation Year-End Inflation Targets
I. Global Monetary Expansion
II. Price Stability
III. Financial Stability
IV. External Balance
17
Global monetary expansion (LSAPP and ULSAP) fuels inflows to
emerging economies with a tendency towards;
a) More debt, less equity,
b) More foreign currency, less domestic currency,
c) More short term, less long term.
The Problem
18
In contrast, emerging economies should provide incentives for
financial inflows with a tendency towards;
a) More equity, less debt,
b) More domestic currency, less foreign currency,
c) More long term, less short term.
The Solution
19
-20
-10
0
10
20
30
40
50
60
70
80
Portfolio and Short-Term* FDI and Long Term Current Account Deficit
Main Sources of Current Account Deficit Finance (12-months Cumulative, Billion USD)
Source: CBRT. *Short-term capital movements consist of banking and real sector short term net borrowing and deposits in banks.
Composition of Capital Inflows
CBRT Measures
20
Source: CBRT.
Note: Period covers from November 2010 to September 2011.
Maturity Extension
Percentage Change in Turkish Lira Deposits by Maturity after Reserve Requirement Measures
(Percent)
21
-100
-50
0
50
100
150
200
250
Up to 1 month 1-3 months 3-6 months 6 months-1 year 1 year and more
-40
-20
0
20
40
60
80
100
120
140
-40
-20
0
20
40
60
80
100
120
140
Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
t
Oct
No
v
Dec
Credit De-dollarization
Foreign Currency Loan Growth (Annualized, percent, 20 days moving averages)
Source: CBRT.
22
2011
2006-2010 Average
2010
Credit Growth
Total Loans*
(monthly change, percent)
Source: CBRT.
*Adjusted for the exchange rate effect.
** Monthly percentage change in credit volume as of 11 October,2011. 23
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
Average of the Previous 5 Years Last Period Difference
I. Global Monetary Expansion
II. Price Stability
III. Financial Stability
IV. External Balance
24
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
2010 2006-2010 Average 2011
Consumer Loans (Annualized growth, percent, 4 weeks moving average)
Growth in Consumer Credit
Source: CBRT
BRSA Measures
RRR Hikes
25
0,9
1
1,1
1,2
1,3
1,4
Average of EM countries: Brazil, Chile, Czech Republic, Hungary, Mexico, Poland, S. Africa, Indonesia, South Korea and Colombia. Last observation: October 14, 2011. Source: CBRT and Bloomberg.
TL
EM Average
TL and Other EM Currencies Against USD* (11 Nov. 2010=1)
Currency
De
pre
cia
tio
n
Ap
pre
cia
tion
CBRT Measures
26
80
90
100
110
120
130
140
150CPI Based Real Effective Exchange Rate (2003=100)
CPI (Developing Countries) Based Real Effective Exchange Rate
CPI (Developed Countries) Based Real Effective Exchange Rate
- - - - Provisional
REER
Source: CBRT.
CPI Based Real Effective Exchange Rate (2003=100)
27
Exchange Rates
23.08.2011 – 21.10.2011 01.11.2010 – 22.08.2011
Source: Bloomberg, CBRT. Note: Positive change means depreciation against US dollar.
Percentage Changes in Exchange Rates
28
-30
-20
-10
0
10
20
30
-5
0
5
10
15
20
Source: Bloomberg, CBRT. Emerging economies include Brazil, Chile, Colombia, Mexico, Poland, Hungary, Czech R., S.Africa, Indonesia, Korea and Turkey
Exchange Rate Volatility
29
5
10
15
20
25
30
Turkey Emerging Economies
Exchange Rate Volatility (percent, implied volatility for the next 12 months)
Current Account Balance (Seasonally Adjusted, Million USD)
Source: TURKSTAT, CBRT. Note: September data is forecast.
External Adjustment
30
-9000
-7000
-5000
-3000
-1000
1000
3000
Current Account (Excluding Energy) Current Account
31
October, 2011
Warsaw
HOW DO CAPITAL FLOWS CHALLENGE
MONETARY POLICY IN CESEE?
Erdem Başçı
Governor