The Lira Crisis : How Turkey and the G-20 Can Help Change the Nature of Global Problem-Solving

This policy paper examines how Turkey and the G-20 can help change the nature of global problem against the backdrop of the Turkish Lira crisis in which global trade and the resilience of the global financial and geopolitical system stands as the primary issue. The Turkish lira crisis which began in May 2018 and was triggered by U.S. sanctions and tariffs on Turkish steel and aluminum imports, has exposed problems associated with one of the world’s fastest-growing and relatively largest emerging market economies (EMEs). We argue that although the potential for wider economic spillover or financial contagion for the advanced economies is relatively modest, the willingness to sustain the country in exchange for credible and rigorously implemented structural reforms is more beneficial as a long run solution for global financial and geopolitical stability than the current approach of nonengagement. As bringing together developed and emerging market economies is one of the goals of the G-20, crisis management by Turkish policymakers in collaboration with supranational institutions, such as the G-20 and the EU should focus on policy measures that mitigate currency crises contagion. We propose recommendations to policymakers on how to tackle such challenges