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In keeping with the importance that the CBRT attaches to academic studies, working papers and research notes in economics prepared by the CBRT staff continued to be posted on the CBRT website. Fifteen publications were added to the CBRT working papers series of peer reviewed research papers written by the CBRT staff members. In addition, another 18 new additions were made to the series of Research Notes in Economics that the CBRT publishes in order to contribute to discussions on economic issues in a timely fashion and to publicize the results of research about the Turkish economy and monetary policy.
Central Bank Review, a peer reviewed journal prioritizing such topics as macro economy, monetary economics, finance and capital markets, banking and financial intermediation, macro and microprudential arrangements, and international economy and finance was published four times by the CBRT.
Meanwhile, articles that were written with contributions of the CBRT staff were published in journals that are listed in the Social Sciences Citation Index.
As part of the Research and Monetary Policy department’s seminar series for the CBRT staff, during which presentations are given by participants from universities in Turkey and abroad, international organizations, and other central banks, the department held only one seminar in 2020 due to coronavirus restrictions.
The Structural Economic Research Department of the CBRT continued to engage in research on identifying the structural factors that restrain the effectiveness of the monetary policy, to formulate policy proposals within the framework of inter-agency cooperation, to support this research with new data and models, to ensure the communication of all research within and outside the CBRT through publications and conferences, and to develop the corporate infrastructure for the work processes the department deals with.
The department’s activities in 2020 may be summed up under four headings: (1) Research into the Turkish economy and monetary policy, (2) Joint studies with other institutions to produce policy recommendations and develop databases required for research, and secretariat work for the Food and Agricultural Product Markets Monitoring and Evaluation Committee (Food Committee), (3) Coordination with academic circles, and (4) Work related to REAL (Real Economic Activity Lens).
The Bank conducted analysis on structural issues such as Turkey’s economic growth, productivity, labor markets, foreign trade, public finance, savings, market structure and competition, the pricing behavior, research and development, entrepreneurship, business dynamics, human capital, education, migration and financial architecture from the standpoints of financial stability and monetary policy.
The Food Committee, secretarial services of which are undertaken by the CBRT, concentrated its activities on solving structural and cyclical issues in agricultural and food industries in an effort to ensure permanent price stability. Food Committee decisions led to a solution-oriented cooperation among institutions and established concrete policy measures thanks to high-level representation from relevant institutions.
Detailed work was carried out in order to identify the structural factors that lead to inflation rigidity and persistence, to help work jointly with other relevant agencies and organizations, and to expand the analytical capacities of the CBRT’s technical units. In this regard, new protocols were signed with other agencies and organizations to enable data sharing and collaboration, and access was provided to new datasets that would make a major contribution to policy making.
In 2020, seven new papers written with contributions of the staff of the Structural Economic Research Department were published in journals that are listed in the Social Sciences Citation Index. Moreover, one article was published in the Central Bank Review, three papers were added to the Working Papers series and four new additions were made to the series of Research Notes. Two papers were published on the CBRT’s weblog. These studies were presented to academics and policy makers at nine national and international seminars and conferences. In the pandemic-challenged year of 2020, the Structural Economic Research department also held four seminars as part of the department’s seminar series for CBRT staff. The Central Bank Review, a journal whose editing and peer review process is carried out by the same department, received 141 article submissions in 2020, 19 of which were published. In total, fifteen new articles were added to the Working Papers series.
In 2020, the CBRT continued to incorporate real sector developments into its decision making at an increasing rate in order to diversify its information base for monetary policy. In this regard, executives of 1,775 firms, of which 878 were manufacturers, and 19 nonprofit organizations were visited. These meetings make it possible to obtain first-hand information on economic activities and decision-making mechanisms of individual firms, and capture the real sector sentiment towards the economy in good time. Information obtained from these meetings helps make better assessments about cyclical economic activity (production and sales, investment, employment, borrowing conditions, prices, and costs). These visits aim to establish an effective communication with representatives of the real sector, exchange views on monetary policy practices and thus contribute to the CBRT’s communication policy.
In addition to the monthly meetings held to follow cyclical developments, theme-based meetings were also held in 2020. In this context, firstly, food, clothing-textile and tourism companies were interviewed in March 2020 and asked to share their thoughts on the effects of COVID-19 and related measures. Meanwhile, a comprehensive theme-based study, “Possible COVID-19 Implications for the Turkish Economy over the Short and Medium Term: Opportunities and Risks”, was also conducted. For the purpose of this research, decision makers of 103 companies were interviewed, and 849 companies filled out a survey.
The Board decision of 12 March 2020 stipulated that 1) the number of company meetings be increased, thus enhancing and enriching the interaction between the CBRT and the real sector, 2) the capacity to identify structural problems and develop policy proposals be expanded, 3) the Bank’s monetary policy framework, policy steps and their effects on the market be explained to an increasing number of companies, and 4) real sector studies be included in the main functions of the Branches in order to benefit from their staff members in the most effective way. Therefore, real sector meetings are no longer conducted by Regional Coordination Divisions within the Structural Economic Research department but by the newly established divisions of Istanbul European Side Real Sector Monitoring, Istanbul Anatolian Side Real Sector Monitoring, Ankara Real Sector Monitoring, Real Sector Studies First Group Coordination, Real Sector Studies Second Group Coordination and Real Sector Analysis. In addition, a new working model was designed to insert this function in CBRT branches.
The design of the new working model helps to converge traditional banking functions with real sector and communication functions over time. Real Sector Studies First and Second Group Coordination divisions implemented a two-stage plan for the transition to the new working model. In the first stage, the transition of nine branches4 to the new model was completed in the September-December 2020 period by reaching the targets foreseen for Branch employees. Thus, Real Sector and Communication teams in these nine branches completed their basic training, conducted all company meetings in rediscount regions in December 2020, and wrote final reports for all interviews. The process of converging branch functions has been initiated with analyses and reports to be prepared on the subjects that fall under the branches’ mandate in the new working model.
A number of research and development studies were carried out to help improve the banknote printing process.
Signature changes were made to 10, 20, 50, 100 and 200 Turkish Lira banknotes of E9 Emission Group, Series IV.
To verify its compliance with the ISO 45001 Occupational Health and Safety Management, ISO 14001 Environmental Management System and ISO 9001 Quality Standards, the Banknote Printing Plant (BPP) underwent an audit by the Turkish Standards Institution on 9-11 November 2020. As a result of the external audit, the BPP was awarded the ISO 45001 certification and maintained the validity of its ISO 14001 and ISO 9001 certifications.
An Anti-Counterfeit Business Processes program was developed and put into use.
New technological solutions and systems in line with the Bank’s objectives were implemented in Information Technologies (IT), and the reinforcement of cyber security continued. Below are the most significant of many improvements carried out throughout the year:
Financial Innovation Department was established in 2020 to conduct multidimensional research in innovative technologies that will affect the future of central banking and the financial system such as digital currency, blockchain, machine learning and artificial intelligence. The Department analyzes developments in these areas through an integrated vision. In addition, the R&D activities carried out within the Department to build the institutional capacity to address all aspects of these technologies that interfere with central banking.
Within the year of 2020, intense research and development activities was started by constructing “Digital Currency R&D Project”. The aim of the project is to examine the issuability of digital currency by the CBRT as a concept under different scenarios, to test and conduct research and development activities.
The outputs from the R&D Project will enable the determination of various features that the digital currency may have, the analysis of the effects to arise by combining these features together, the determination of technological requirements and the understanding the extent that available technologies meet these requirements.
Within this project, a proof of concept for a digital currency transferrable between parties was successfully completed by the CBRT’s own staff. The experience gained from the proof of concept made it possible to conduct a pilot study under the “Digital Currency R&D Project” and relevant preparatory work was initiated in that direction.
Preparatory work for the initial phase of the pilot study under the R&D project is ongoing. This pilot study will obtain comprehensive data on the design of digital currency and develop prototype systems by testing various scenarios regarding the usability of a digital currency in real life.
The Department conducted research and development activities regarding artificial intelligence and machine-learning tools, collected findings and built data tables based on these findings.
Efforts were made to benefit more from innovations that represent an opportunity given the growing trend of digitalization worldwide. In this context, a Machine Learning School was designed to teach practical knowledge and skills about the basic concepts and tools used in machine learning and data science, and training was organized for in-house participants. Courses on “Introduction to Programming with Python” and “Introduction to Data Science”, the school’s first two initiatives that will lay the groundwork for applied machine learning, were carried out.
Efforts were made to diversify and update the monetary policy dataset; a big data environment was prepared with other stakeholders using that dataset, and preparations for the necessary infrastructure to enable working with artificial intelligence and machine learning techniques were initiated.
