Turkey is one of the fastest emerging market economies with a growth rate of 11% in its first two quarters during 2010. Given its low debt and strategic geographical location (surrounded by Middle East, North Africa, and East Europe), it is rapidly becoming popular among foreign investors. Lately, the country has seen a surge in the capital inflows (decrease in Net Capital Outflow) as the investors expect to receive high returns from the their investment in the Turkish market.
We learned from our class discussion on "Open Economy" that decrease in "Net Capital Outflow" appreciates a nation's "real exchange rate" as its supply of currency goes down. And this is exactly what is happening to the Turkish "Lira" as it recently gained 11% against the dollar.
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