Acemoğlu urges Turkish gov't to keep hands off Central Bank

World-renowned economist Daron Acemoğlu has highlighted the importance of monetary-policy independence, saying the Turkish Central Bank should not be at the mercy of “instructions received from the prime minister or president.” Acemoğlu also expressed his concern that the current economic crisis in Turkey could deepen.

World-renowned economist Daron Acemoğlu is seen in this file photo.

Duvar English

World-renowned economist Daron Acemoğlu has emphasized the importance of the Central Bank's “autonomy,” when asked about what kind of steps need to be taken to improve the Turkish economy.

“What is most important in the economy is that the state needs give confidence to people. There is a need for the right structuring of personnel who have autonomy. It is accepted all over the world that the Central Bank needs to have autonomy. There should not be any monetary policy based on instructions received from the prime minister or president. When you are in this way, foreign capital would not come,” Acemoğlu said.

The renowned economist, currently a professor at the Massachusetts Institute of Technology (MIT), made the remarks during an interview with T24's journalist Murat Sabuncu on May 26.

Acemoğlu also expressed his concern that the current economic crisis in Turkey could deepen. Asked if there is a possibility of the situation getting worse over the upcoming one or two years, Acemoğlu said: “Of course, I have such a big fear of this. The chance of this happening is very high. We have not yet seen the real dimension of the problems of the last five years.”

He said several companies that have been financially struggling for the last five years have not yet gone bankrupt, but questioned “how much longer they can manage to stay afloat.”

“What kind of effects will they have on banks? When our reserves have decreased so much, how much longer will we be able to keep the exchange rate and interest rate in this way? There is a high probability that these dimensions will go much worse,” he said.

Acemoğlu's comments came a day after President Recep Tayyip Erdoğan removed another Central Bank deputy governor, without giving any reason. Erdoğan's move marked the departure of the fourth Central Bank policymaker in the last two months.

Announced in an official decree overnight on May 25, the reshuffle had little effect on markets.

This was a significant difference from the market reaction to Erdoğan’s Central Bank intervention in March, when he sacked former central bank chief Naci Ağbal after less than five months in the job. 

Many analysts point out that Erdoğan’s moves are particularly unsettling for investors because they demonstrate that Turkey’s Central Bank and monetary policymaking aren’t independent, and are at the mercy of the president’s political impulses.