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Cool Video: CNBC Discussion on Turkey

Marc Chandler

I had the opportunity to join Professor Hanke to discuss the crisis in Turkey. The professor sketched out his view expressed in a recent op-ed piece in the Wall Street Journal, arguing that Turkey is best served by adopting a currency board, anchoring the lira to hard currency, like the euro or dollar, or gold.

I do not see Turkey’s problem being essentially a currency crisis, but a broader crisis of confidence. It stems not just poor macroeconomic conditions, but also, and more importantly, the lack of a credible policy response. The independence of the central bank has been compromised. While the dislike for the painful medicine that orthodox policies would entail is understandable, Turkey has failed to announce any strong policy response.

A currency board is a way to outsource monetary policy. That too would seem loathsome to the nationalistic government. Moreover, it would require more credible policy. Without policy change, the Turkish lira’s bounce today may prove to be short-lived.

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Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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