and even from one period of time to another for the same country. first, it is important to note that in the design and implementation of monetary policy, the understanding of structural changes is essential since the impacts of monetary policy decisions in a given economy depend on its structural changes and macroeconomic environment 2. on the other hand, it is clear that emerging economies like turkey are subject to structural changes more frequently than any other developed economy. combining these two facts, central bankers in emerging economies face the challenge of modeling the economy properly and react accordingly. in addition, i believe it is not an exaggeration to say that subsequent crises and reform processes have largely defined the economic landscape of emerging market economies in the last twenty years. thus, uncertainty, which naturally exists in every economy, constitutes a real challenge for central bankers in many emerging economies because of their volatile and unpredictable structure. dear guests, what we have been experiencing in the turkish economy in the last five years can be classified as one of the clear examples of the impact of structural changes on an economy. first of all, after a thirty - year period of high and chronic inflation, inflation declined from 68. 5 percent in 2001 to 10. 26 percent in august 2006. this decline in inflation also made it possible to perform the currency reform at the beginning of 2005 and we dropped six zeros from our currency. second, we experienced high growth rates while inflation was falling. i can say that the turkish economy has left behind the boom - bust cycle of growth and has been growing for the last eighteen quarters consecutively. additionally, the sources of growth have changed, as well. third, the declining trend of the ratio of public debt to national income has contributed both to the fight against inflation and the relative stability in financial markets. all these developments through the decisive implementation of policies have reflected themselves in reducing uncertainty and increasing predictability, strengthening macroeconomic fundamentals, increasing resilience to shocks and changing the dynamics of the economy bringing the private sector to the forefront ; rising productivity, changing behaviors and increasing competition. all in all, it is clear that the turkish economy has been undergoing a structural transformation since 2001. after going through a deep structural transformation, it is safe to say that the turkish economy has gradually been normalized. according to our studies, the impact of decisions of short - term interest bis. ( 1998 ). “ the transmission of monetary policy in emerging market economies ”. bis policy papers no. 3. rates on inflation and on the economy

industrial and services sectors, while the gdp share of agriculture has greatly declined. the share of the public sector in industrial output has also decreased. - spending on investments has been increasing since the first quarter of 1995. normally, periods of investment aimed at increasing production capacity last for about 20 months, but the increase in investment activity spending remained focused on increasing production capacity throughout 1995 and 1996. the economic trend analysis of the central bank of turkey shows that no earlier period of expectation of rising investments has ever lasted longer. - official records show that turkey ’ s unemployment rate has been holding fairly constant at around 7 or 8 percent, which is very low compared to the other oecd countries. in april 1996, total employment rose by 2. 6 percent and unemployment fell to 6. 3 percent. the urban and rural unemployment rates were estimated at 9. 3 percent and 3. 8 percent respectively. in addition, turkey was among the top ten countries in terms of improving its score on the united nations ’ human resource development index, which is based on a country ’ s literacy rate, per capita income, and life expectancy. of course, such a nation - wide measurement takes no account of the wide differences between urban and rural conditions. be that as it may, the strong growth of the working age population, the high degree of urbanisation, and increased numbers of well - educated young workers are all favourable to strong growth in labor productivity. - turkey has a strong, dynamic and competitive private sector. the nonagricultural private sector recovered quickly from the financial crises in spite of unsettled political conditions and extremely high interest rates. in addition, it is the private sector that has been mainly responsible for capital formation. · - there have been interesting developments connected with turkey ’ s foreign exchange earnings. even though the official trade account and current account figures reflect sizeable deficits, i would like to emphasise that the level of merchandise exports is significantly understated due to its omission of rapidly growing but unrecorded “ shuttle ” trade with neighbouring countries. we are on the verge of being able to include these activities in our balance of payments figures. in addition, there has been serious underreporting of the value of transactions connected with some of turkey ’ s foreign direct investments, a problem that the central bank is working to resolve. now let me touch briefly on turkey ’ s financial system. turkey ’ s financial sector is still dominated by the banking sector. in other words,