Turkey : the logic behind its unorthodox monetary policy bet

A remarkable GDP growth recovery marked by a resilient manufacturing activity, a currency crisis that has resulted in a whirlwind inflation spike, and the recent implementation of an unorthodox monetary policy are some of the elements that make of the Turkish economic conjuncture an interesting case. Over the past months, the collapse of the Turkish lira that resulted from the central bank monetary policy turn towards an easing cycle acted last September has occupied headlines as it does not only rise fears on the Turkish economy stability but also on its possible spillover effects across Emerging Markets. It would be unfai r to caricature the Turkish president's gamble as an initiative devoid of any economic strategy. The monetary policy imposed by Recep Erdoğan aims to accelerate growth above all, but also to transform the Turkish economy and in particular to correct some of its structural weaknesses: a chronically negative current account balance, a considerable fragility to international capital movements and a high unemployment rate. In this paper we present a summary of the Turkish economic conjuncture, followed by a chronology of the current currency crisis to finally discuss on the logic behind President Erdoğan monetary policy choice.