The role of direct flights in trade costs

Effects of direct flights on trade costs are investigated using micro price data at the city level. After controlling for local retail/distribution costs, traded input prices are obtained to be further used in the measurement of trade costs across cities through arbitrage conditions. The existence of a direct flight enters trade costs regressions negatively and significantly. The results are shown to be robust to the consideration of many control variables, nonlinearities in the effects of distance on trade costs, possible endogeneity of having direct flights between cities and alternative definitions of the data. The direct flights that are shown to be determined by bilateral air services agreements are further shown to reduce trade costs through an endogeneity analysis; the main policy implications are twofold: (i) international trade policies through aviation services, such as Open Skies Agreements of the US, are alternative trade policy tools to reduce international trade barriers; (ii) direct flights facilitate the integration of internal markets as in the case of European Union.     

Monetary policy and credit cards: Evidence from a small open economy

This paper uses a unique monthly data set that covers the overall credit card usage in a small-open economy, Turkey, to investigate a possible credit channel of monetary policy transmission through credit cards. A reduced-form vector autoregression analysis is employed, where the forecast error variance decompositions are calculated for three-year windows over the period 2002–2009. It is shown that, during the recent financial crisis that has started in 2007, the monetary policy of Turkey has shifted toward focusing on output volatility and interest rate smoothing through setting short-term interest rates, while the inflation rate has been mostly affected by exchange rate movements and inflation inertia. Credit card usage has an increasing effect on inflation rates through time, requiring more policy emphasis on the credit channel through credit cards. When the effects of the credit view and the money view are compared, the former seems to be more effective on the real side of the economy, independent of the level of inflation.     

Mismeasurement of Distance Effects: The Role of Internal Location of Production

The estimated effects of distance in empirical international trade regressions are unrealistically high. Using state‐and‐sector level US exports data, this paper shows analytically and proves empirically that ignoring the internal location of production (of international exports), which leads to the overestimation of distance effects by about twofold, is a possible explanation. This overestimation is mostly attributed to the mismeasurement of the distance elasticity of trade costs when internal locations of production are ignored. A corrective distance index is proposed to avoid such mismeasurements and is shown to work well for the median sector. The results are robust to the consideration of alternative estimation methodologies and data sets.     

Inflation,financial development,and growth: A trilateral analysis

A large body of evidence links financial development to economic growth, yet the channels through which inflation affects this relationship and its stability have been less thoroughly explored. We take an econometric and graphical approach to examining these channels, and find that higher levels of financial development, combined with low-inflation, are related to higher rates of economic growth, especially in lower income countries, but that financial development loses much of its explanatory power in the presence of high-inflation. In particular, small increases in the price level seem able to wipe out relatively large growth effects of financial deepening when the annual rate of inflation lies between 4% and 19%, whereas the operation of the finance–growth link is less affected by inflation rates above this range. Growth is generally much lower, however, in such high-inflation settings where financial development is typically repressed.     

Price dispersion across US districts of entry

Price dispersion of US imports are investigated across US districts of entry. Markups explain about 31% of price dispersion, while marginal costs of production explain about 69%; effects of trade costs, for which we have actual data, are almost none.     

Capital mobility and foreign debt sustainabilty: some evidence from Turkey

This paper address the extent of capital mobility and foreign debt sustainability in Turkey over the 1962–2003 period by examining the relationship between saving and investment, and imports and exports, respectively. The empirical investment is based on cointegration, error correction models, and threshold and momentum threshold autoregressive models. Our findings are consistent with the existence of capital mobility and the ‘Strong’ form of foreign debt sustainability.     

An analysis of regime shifts in the Turkish economy

We use a time-varying dynamic factor model with regime switching to construct and estimate the leading indicators of the currency crises in Turkey. After that, we analyze the business cycles of the Turkish economy, by using a three-state univariate Markov-switching model. Both models capture the observed dynamics of the Turkish economy over the period 1987–2002.     

Spatial dispersion of retail margins: evidence from Turkish agricultural prices

The farmer share of retail prices is shown to be about 16%, corresponding to about 84% of a distribution share, on average across agricultural products and regions within Turkey. The share of transportation costs in retail prices is only about 7%, while the share of retail margins is about 77% of retail prices. The dispersion of retail prices across regions is shown to be mostly due to local wages and variable markups, while the contribution of traded‐input prices is relatively small. Accordingly, the high dispersion of farmer prices across locations is not reflected in the dispersion of retail prices due to the high contribution of retail margins. These retail margins are also shown to account for about one third of the consumer welfare dispersion across regions and more than half of the consumer welfare dispersion across products.     

Can inflation targeting regimes be effective in developing countries? The Turkish experience

This paper examines the performance of Turkey's inflation targeting (IT) experience. We find the IT regime to be an effective framework. Our judgment is based on three broad conclusions supported by empirical analyses. First, fiscal stability is an effective tool for a successful monetary policy. Second, the overnight policy of the Central Bank of Turkey rate is a significant determinant of the changes in market lending rates, which is the preliminary step in the monetary transmission mechanism. Third, recent developments on the broader issue of the effectiveness of interest rate policy in controlling inflation through aggregate demand management and through other channels are encouraging. Based on our findings, we argue that the impact of policy rate changes on economic activity and inflation have become more predictable and changed in the direction in line with theory, improving the transmission capacity of monetary policy.     

An exploratory analysis of the influence of human resource management activities and organizational climate on job satisfaction in Turkish banks

This study aims to explore the influence of human resource management (HRM) activities and organizational climate on job satisfaction in Turkish banks. The study first examines the relative influence of eight HRM activities of: (i) behavior and attitudes (in recruitment and selection); (ii) teamwork; (iii) extensive training; (iv) written policies; (v) training in multiple functions; (vi) incentives; (vii) performance appraisal; and (viii) feedback on performance on job satisfaction. Second, the influence of six factors relating to organizational climate are examined, again from the view point of their influence on job satisfaction. The second group factors are: (i) support for innovation; (ii) managerial competence and consistency; (iii) workload pressure; (iv) cohesion; (v) organizational boundaries; and (vi) organizational ethics. The data collected through interviews from 346 employees from 19 banks show that in addition to the positive impact of HRM activities, organizational climate in particular makes a significant contribution to job satisfaction. The paper presents the influence of the two groups of factors on job satisfaction and the mechanisms through which these factors foster job satisfaction and their implications for practitioners.