Turkey Economy Turkey -- Fiscal and Monetary

Turkey Economy

Turkey -- Fiscal and Monetary Policy

Fiscal policy refers to how a government adjusts its level of spending on various goods and services it provides to a population. Governments can spend money in a number of different ways that ultimately serve the public good. They can employee people to work on various projects. For example, the government can invest in things like health care, infrastructure, or education. Investments in such project can have a significant impact the country's economy. When the government spends money there is a multiplier effect that injects money into the economy. For example, when the government pays an employee then that employee has money to spend on housing, food, entertainment, and other items which helps to stimulate the economy on an aggregate level.

Monetary policy is an entirely different type of policy tool than fiscal policy. This policy is determined by a federal bank or central bank that can change the total money supply through activities such as issuing bonds or changes in the fractional reserve limits or system. This acts to make more or less money available to the economic system. When more capital is available the consumer and business can have more money to invest in various things. The foreign exchange rate is also an important consideration for monetary policy. For example, when Turkey exchange rate is high relative to other currencies then this makes Turkey's exports more expensive and also will likely increase imports.

Because of the political and civil unrest in North Africa, Turkey has been punished by equity investors. The result of the instability has pushed the country from one of the best performing emerging markets in 2010 to levels not seen since March 2006 (Business Insider, 2011). However, in the midst of the 2009 global economic crisis, Turkey has managed to still perform very well in the global market. The Turkish economy is expected to experience robust growth at a13.2% CAGR over the next five years and reaches $1,226 billion by 2017 (Bureau, 2012). Most of this growth has been fueled by the increases in the services industry. However, Turkey has also seen the total amount of imports has improved as well. Yet the country's economic growth has not been spread equally across the economy and some industries are struggling.