especially emerging economies that are in deficit, still being in convergence stage, need to raise their production capacity to pay off their external debt accumulated during their catch - up. therefore, i strongly believe that a holistic approach is a must. while developing any kind of policies, including fiscal tightening or restructuring, one should pay great attention to negative externalities these policies may cause on other economies. in particular, we should avoid beggar - thy - neighbor type of policies. unless all participants provide appropriate contribution, the global economic recovery will not be safe and sustained. it is obvious that the emerging economies will be the major driving force behind the global growth but it remains crucial that each country with its capacity should make its contribution to revive global demand. currently, there are intense debates within the global community, particularly inside the g20 and fsb, to restructure the financial system and put in place a radical and quite ambitious financial sector reform agenda. it is imperative to repair and rebuild a well functioning financial system that can support growth while maintaining financial stability. these reforms are wide ranging, including implementing new capital and liquidity standards, promoting principles for effective supervision, looking at ways to constrain moral hazard, developing cross - border resolution mechanisms, agreeing to reforms on otc derivative markets to reduce systemic risk and improve market efficiency and integrity, and agreeing on a single set of high quality, global accounting standards. we very much welcome the work carried by the basel committee. strengthening capital and improving liquidity standards should be seen as the main tools to reach a more resilient banking sector. turkey ’ s experience shows that a sound capital base, appropriate liquidity and well supervised leverage are the key elements that assure a healthy banking system. the difficulties faced by advanced economies today may be unprecedented in scale, but not unique in nature. some countries experienced similar difficulties in the past and they developed comprehensive schemes to satisfy the principle of fair and substantial contribution of financial sector and taxpayer protection as well. for example in our case the amount of bailout we provided to the banking industry in 2001 was as high as almost 30 % of the gdp. so we developed a regulatory framework to assure that such a disaster does not happen again, and if it happens how the resolution would be carried and how it would be financed. before implementing comprehensive financial regulations on a global scale, all countries should undertake comprehensive impact studies and assess possible spillovers to emerging countries before putting such schemes into action. all necessary measures should be taken so that already fragile

variables, inflation - targeting central banks adopt a medium - term approach and allow temporary fluctuations in inflation as long as the expectations are under control. in this framework, the primary objective of setting an uncertainty band is to establish a measurable criterion that will enable to determine to what extent the deviations from the point target will be tolerated with respect to the accountability principle. in view of the above - mentioned factors, it has been decided to keep the uncertainty band at 2 percent for 2008 as well. in this context, the path consistent with the end - year target and the uncertainty bands defined for the end of each quarter of 2008 are given in table 1. table 1 : inflation path consistent with the end - year target and the uncertainty band march june september december uncertainty band ( upper limit ) 9. 10 8. 50 8. 30 6. 00 path consistent target 7. 10 6. 50 6. 30 4. 00 5. 10 4. 50 4. 30 2. 00 with the uncertainty band ( lower limit ) in case of realizations of the end - of - quarter figures outside the band, the central bank shall submit an open letter to the government disclosing the reasons of the deviation and the measures already taken and to be taken for convergence to the target, and share this letter with the public. recently, the overview chapter of the inflation report has been restructured in line with accountability principle. accordingly, the central bank has started using inflation report to share its view pertaining to inflation and monetary policy outlook and the necessary measures to be taken to keep inflation close to the target. thus, besides being the main communication tool of the bank, the inflation report has therefore assumed an important role with respect to accountability principle as well. accordingly, there will be more references given to the inflation reports in the case of possible open letters in forthcoming periods. it is necessary for the communication policy of the central bank that the open letters and inflation report would be perceived as complementary factors. role of public sector in inflation targeting strategy it should be reemphasized that the monetary policy should be supported by fiscal policy in order to be able to turn the downward trend in inflation into a long - term and lasting achievement. the fiscal policy can affect inflation through various channels. a particular channel, through which fiscal policy has direct effects on inflation, is the price and tax adjustments in the goods and services produced by the public sector. making these adjustments in line with a pre - announced schedule or a pre - described rule would