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Turkey: capital controls would probably be ineffective

Turkey’s large external vulnerabilities mean that aggressive rate cuts by the central bank (CBRT) would run the risk of sharp and destabilising falls in the lira. A probable next step by policymakers would be a turn towards capital controls. But we doubt that these would be effective and, with officials unlikely to take steps to restore macro stability, some form of adjustment will still be needed in the coming years.
Jason Tuvey Senior Emerging Markets Economist
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