The economic model of Turkey and the role during the crisis

Topics: Central bank, Monetary policy, Financial crisis Pages: 5 (1547 words) Published: October 27, 2013
The economic model of Turkey and the role during the crisis

Introduction
After the great depression in 2008/09 the economies in the world were very instable. A lot of the countries were in capitalized troubles. The root cause of the Subprime mortgage crisis were very complex and the result of years of years of failure of different institutions and the government in the USA as well as in Europe. The outcome was a worldwide depression, which claimed many victims. Compared to most of the countries, the Economy of Turkey weathered the crisis very quickly. The major reason for that was the bank crisis in Turkey in 2000/01, because the national bank of Turkey pursued a very restrictive fiscal policy in Turkey. Furthermore the measures that the government adopted were also very important for the recovery of Turkey’s economy. Finally Turkey was one of the few economies in the world, which reached the pre-crisis level perceivable fast.

Subprime mortgage crisis in 2007/08
There are many theories for the outbreak of the subprime crisis of 2007. The most common explanation is due to the greed of the bank manager and the failure of regulators. But the causes of this crisis are much more deep-seated and the result of structural changes in the last 30 years. The cause of the worldwide spread crisis goes back to the U.S. housing market and the U.S. financial market. The number of mortgage loans increased within a few years of very strong, as many house-owners with mortgages were issued dubious solvency. The loans were generally designed so that the interest rates were low in the early years, but later they incrementally increased. The credit facility was adjusted automatically according to the increase in value of the property. Through the actions of the U.S. military in Afghanistan and Iraq, according to 9/11, the U.S. Federal Reserve lowered from 2001 the base rate continuously, namely by 6.5% pa in 2001 per annum up to a low of 1%. In mid-2003, as in political terms favorable loans were needed. From this continuous interest rates eventually followed by an increased demand for credit. These loans were primarily invested in the real estate sector, as this was considered to be safe and not risky, because most of them were rated with the best rating (e.g. AAA). It loans to borrowers who have been awarded that have had low creditworthiness. The central bank raised the interest rates by a percent to 5.25 % in 2007, which was the reason why the variable interest rates also rose enormously. To reduce the risks to lenders mortgage banks, these loans were securitized and sold in the capital market, which were rated as very safe, because the loans were secured by real estate values, these securities were valued accordingly. After the year 2007/08, the U.S. real estate market collapsed, in other words the bubble popped, it was impossible for credit user to pay the rates, because of their bad financial standing, therefore most of the bonded securities did losses and were a debit for the balance sheets of the banks and they were called toxic assets. The goal of the securitized loans was to scatter the risk. Since these securities were also offered on the international capital markets. Most of the banks who bought these securitized loans were state banks, because they need to be competitive against the private banks, but they also have statutory provisions and therefore they have to operate in stable value investments. In fact the state-banks were more intensive focused than private banks in the market of securitized loans. Finally, the result of the financial crisis in the United States led to a global economic crisis, which affected the whole globe. The outcome of this huge failure of the government and the financial markets were declining growth, which was the main reason why millions of people lost their jobs. The growth slumps most states affected worldwide, with the exception of some Asian countries such as China and India....

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