3 European Commission Report (2015), “Completing Europe’s economic and monetary union”, by Jean-Claude  Juncker in close collaboration with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz (the Five Presidents’ Report). 4 Furceri, D. and A. Zdzienicka (2015),“The euro area crisis: need of a supranational fiscal risk sharing  mechanism”, Open Economies Review 26(4): 683–710; previously published in 2013 as IMF Working Paper 13/198; Asdrubali et al. (1996), “Channels of Interstate Risk Sharing: United States 1963–1990”, The Quarterly Journal of Economics, 111(4): 1081–1110. 5 Bank Recovery and Resolution Directive, 2014/59/EU of 15 May 2014 establishing a framework for the recovery  and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council. 6 ECB Opinion on 20 April 2016 on a proposal for a Regulation of the European Parliament and of the Council  amending Regulation (EU) No 806/2014 in order to establish a European Deposit Insurance Scheme (CON/2016/26). 7 Carmassi, J., S. Dobkowitz, J. Evrard, L. Parisi, A. Silva and M. Wedow (2018), “Completing the Banking Union  with a European Deposit Insurance Scheme: who is afraid of cross-subsidisation?”, ECB Occasional Paper 208, April 2018. 8 8/9  BIS central bankers' speeches  8 CRD IV includes: Capital Requirements Directive (2013/36/EU) (CRD), which must be implemented through  national law, and Capital Requirements Regulation (575/2013) (CRR), which applies to firms across the EU.

Unfortunately, here in Turkey we did not live in such an  BIS Review 19/2006  1  environment. It was very difficult to predict money demand under a chronically high inflation environment as it was unstable. Moreover, the link between inflation and monetary aggregates was not stable neither. The final alternative was the choice of the inflation itself as the nominal anchor and that obviously refers to the “inflation targeting regime”. In addition to having an anchor, which is highly transparent, inflation targeting was viewed to be superior to all other monetary policy regimes because all available information is used in the monetary policy decision making process. Besides these features, Fred Mishkin (2000) for instance addresses the following favorable aspects of the inflation-targeting regime: “Because an explicit numerical target for inflation increases the accountability of the central bank, inflation targeting also has the potential to reduce the likelihood that the central bank will fall into the time – inconsistency trap. Moreover, since the source of time inconsistency is often found in political pressures on the central bank to undertake overly expansionary monetary policy, inflation targeting has the advantage of focusing the political debate on what a central bank can do in the long run.” On the other hand, as it is widely discussed in the literature, the success of the regime depends on the fulfillment of the necessary preconditions such as central bank independence, sound and welldeveloped financial sector and absence of fiscal dominance.