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Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic policy adjustments, the government has adopted a mix of less direct and more partial measures – and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat with the United States, as well as operating in a more fluid global economy. How all this plays out is important not only for Turkey, but also for other emerging economies that already have had to cope with waves of financial contagion. The initial phases of Turkey's crisis were a replay of past emerging-market currency crises. A mix of domestic and external events – an overstretched credit-led growth strategy; concerns about the central bank's policy autonomy and effectiveness; and a less hospitable global liquidity environment, owing in part to rising U.S. interest rates – destabilized the foreign-exchange market.All of this occurred in the context of a more uncertain and – aside from the U.S. – weakening global economy.In keeping with the traditional emerging-market-crisis script, Turkey's currency crisis spilled over onto other emerging economies.
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