In the same period, inflation has at times relatively declined, but it was impossible to maintain a permanent recovery that could be identified as price stability. During the period between the first half of the 1970s and the early 1980s, studies and applications to fight inflation and to maintain price stability in developed economies intensified, whereas inflation accelerated due to the financing of public deficit by the Central Bank. In the second half of 1980s, the inertia arising the Central Bank meeting public deficits brought about abandoning of discipline in public expenditure changes in production-consumption behavior together with inflation and deterioration in the social structure. In the early 90s, apart from relatively short-term periods of stability, lax fiscal policies continued to be implemented along with monetary policies aimed at preventing a possible crisis. Price stability was not a priority, moreover, inflation entered a selffulfilling cycle. It is a fact that during this 30-year period, price stability was not the main objective and the necessary structural arrangements for maintaining economic stability, including price stability and sustainable growth, were not taken into consideration. This period of long-term chronic inflation brought with it a lot of negativity. As it is known, price stability is the sine qua non for maintaining economic and social stability. The extent of the damage to the economy as well as political and social structure of a country caused by failing to achieve price stability is clearly in the in the state of the country during this period and in the experiences of other countries.

Secondly, due to the development of the derivatives markets, the foreign trade level in a floating exchange rate regime will be the same as the level in a fixed exchange rate regime. Hence, exchange rate risk will not affect the level of foreign trade3. Turkish derivatives exchange (Turkdex) In this framework, the effective operation of derivatives markets is for enabling economic agents to hedge their balance sheets from exchange rate risks under the floating exchange rate regime. Macroeconomic stability and the structural transformation process have provided our economy with a  3  Baron D. (1976). Flexible Exchange Rates, Forward Markets and the Level of Trade. The American Economic Review. Vol. 66. No. 3. BIS Review 36/2005  19  sound environment for risk management. And, the establishment of the Turkish Derivatives Exchange has been an important step taken on the way. It would be useful to reiterate the potential favorable effects of derivatives markets on our economy. First of all, derivatives markets offer economic agents the facility of risk management and make their future revenue flows predictable. Moreover, expectations can be measured and reflected on prices through these markets. This, in turn, increases the predictability and efficiency of spot markets. In this way, market prices provide economic agents with accurate information and excessive volatility decreases. Analyzed in terms of their impact on the real economy, the use of derivatives markets increases resistance to shocks in the economy as a whole as it reduces weaknesses resulting from the imbalance on firms’ balance sheets.