The tradition at Turkish weddings is to pin gold on the bride, in lieu of getting the newlyweds a present, as a way to help them start off their married life in prosperity. However, now due to the high inflation, couples prefer dollars to gold coins.
Turkey has been facing a financial crisis: the Turkish lira has fallen from 3.50 to the US dollar (May 2017) to 18 per dollar (Dec 2021), and inflation reached 68% in April, where it is expected to stay for some time. The COVID-19 pandemic has directly harmed income and employment by reducing travel to a country that relies on tourism for 4% of its GDP and almost 10% of employment.
The COVID pandemic has only been an issue for 18-24 months. President Reccep Tayyip Erdoğan’s counter-productive economic policies are older. His influence of the Central Bank overheated the Turkish economy. Excess growth and artificially low interest rates have spurred inflation and strained supplies of the lira: “Sometimes we cannot find money,” said a 29-year-old bike courier in Istanbul to the New York Times.
Traditional economic theory posits that a weak currency will stimulate foreign investment and exports, thereby producing economic growth. The case of Turkey, however, lines up with structuralist economic theory: inflation and devaluation have increased production costs and constrained economic growth. Turkey, for example, depends on imports of automobile parts and medicine so the devalued currency has raised costs and reduced exports and income.
Devaluation has not only reduced purchasing power for citizens but economic growth. Combined with a multitude of other deviations from orthodox economic policy (i.e., overuse of external financing, not regulating the exchange rate, etc.), the Turkish financial crisis harms the economy and increased political unrest.
Turkish brides must be hoping for enough dollars to keep the lights on.
Bottom line: The Turkish Central Bank needs to employ traditional economic remedies to their financial crisis, i.e., increasing interest rates to decrease liquidity and spending and support the lira. On a longer time horizon, Turkey needs to free its central bank from political interference, if it wants fiscal stability and economic prosperity.
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