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Global Economic Analysis DQ

Global Economic Analysis DQ

Q The recent troubles of the Turkish's Lira offer a very interesting application of what we have studied in the second half of this course (from Week 7 to Week 11). The attached reading from the New York Times " Why Turkey’s Lira Crisis Matters Outside Turkey - The New York Times.pdf Why Turkey’s Lira Crisis Matters Outside Turkey - The New York Times.pdf - Alternative Formats ", by Matt Philips, August 13th, 2018, touches almost all the topics we have covered: a Balance of Payments problem, an exchange rate depreciation, and the risk of financial contagion. Now that you are well-versed in the language of international finance, you should be able to: • Summarize the reading (between 100-200 words; due date: Thursday 11/1 at the end of the day) • Explain how the topic discussed relates to the content we learn during lecture (between 100-200 words; due date: Thursday 11/1 at the end of the day) • A Bonus for this discussion would be if you could use a diagram (you can draw it even by hand and then upload it as a picture) to help your argument. For example, what diagram would best describe an "exodus of foreign investors"? • Tell us your personal opinion on the topic (between 100-200 words; due date: Thursday 11/4 at the end of the day) o Possible ideas for this part: What do you think the Turkish President should do to convince foreign investors not to pull their funds? • Critique/Comment on one of your colleagues opinion (at least 100 words; due date: Sunday 11/4 at the end of the day)

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In the current economic scenario, any problem regarding the domestic currency would affect the trade partners of that country. The effect would be more impactful for a dynamic economy. Currently, the Turkish economy goes through a crisis period as the value of Libra has crashed by 20 percent. The government’s control of the free economy has affected the Turkish economy to a great extent. In 2018, the Turkish Libra has become 7.24 against the U.S. dollar which is a record low value for this currency ("Turkey lira crisis: Six things you need to know", 2018). The inflation rate of Turkey is currently at 16 percent and that has a negative impact on the Turkish economy. From the Venezuelan crisis, economists have learned that the hyperinflation can be as bad as the economic depression. So, the inflation rate of