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According to Erdogan's thesis, which points to inflation as an effect of interest, if the interest rate is lowered, inflation will follow.

A good one. This idea is e.g. shared by Jaime Caruana, General Manager of the Bank for International Settlements. But obviously in this other direction: Inlfation in the Eurozone is low because rates are low!

For Turkey the situation is not so easy. If you are a smaller economy you have to import a lot, therefore dropping the value of your currency can have substantial negative effects. That is why capital control is so important. Turkey should have controlled the influx of money, to prepare for its inevitable outflux.

by rz on Thu Jun 5th, 2014 at 07:08:49 AM EST
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