Turkey Capital Controls May Bring 'Death Spiral,' Says Mostaque

The video discusses the likelihood of Turkey implementing capital controls, estimating it to be less than 10%. It highlights the potential negative impact of full-scale controls on the economy. The Turkish banking system's reliance on foreign currency deposits and the challenges of mismatched liabilities are examined. Alternatives to capital controls, such as macroprudential measures and international alliances, are considered. The need for foreign direct investment to address the current account deficit is emphasized, along with the risks posed by capital controls to financial inflows.

What is the estimated probability of Turkey implementing comprehensive capital controls?

• Around 25%

• More than 50%

• Almost certain

• Less than 10%

What could be a consequence of Turkey introducing full-scale capital controls?

• Economic growth

• A death spiral

• Increased foreign investment

• Stable currency

Which strategy is Turkey likely to avoid due to its impact on the economy?

• Implementing macroprudential measures

• Raising interest rates

• Forming alliances with Gulf states

• Setting up swap lines

Why is Turkey seeking foreign direct investment?

• To finance the current account deficit

• To reduce inflation

• To boost local industries

• To increase exports

What is a major concern for investors regarding capital controls in Turkey?

• Inability to repatriate funds

• Political instability

• High interest rates

• Lack of investment opportunities