durmus yılmaz : central bank achievements and opportunities in turkey speech by mr durmus yılmaz, governor of the central bank of the republic of turkey, to members of the press at the central bank of the republic of turkey, ankara, 18 april 2006. * * * dear press members, i have been appointed governor of the central bank, which was vacated by former governor mr. sureyya serdengecti due to his retirement after having completed his five - year term on 14 march 2006 at the end of the business hours, and which has been filled temporarily by dr. erdem bascı as acting governor since then. i have worked in various positions of the central bank of the republic of turkey since 1980. as you have been closely following, many achievements have been made since then, especially in the last couple of years, that will always be remembered as the turning points in our economic history. distinguished members of the press, as a result of the legal amendments made in 2001, the greatest achievement in the area of monetary policy has been the attainment of the “ central bank independence ”. accordingly ; “ the bank shall, with the objective to achieve and maintain price stability, be authorized to utilize monetary policy instruments described in this law and shall also be authorized to directly determine and implement other monetary policy instruments that it deems appropriate. ” as expressed in the law on the central bank. such an authorization is called “ instrument independence ” in the modern economic literature. on the way to price stability, the inflation target is determined jointly with the government. as you know, these targets have been determined and announced as follows : 5 percent for 2006, 4 percent for 2007, 4 percent for 2008 our primary objective is to attain these targets. the central bank will support the growth and employment policies of the government, unless it conflicts with this objective. likewise, with the law no : 1211, the central bank has been entrusted with the power of establishing the “ exchange rate regime ” jointly with the government. the floating exchange rate regime, which was introduced within this framework, will continue to be implemented, preserving its basic implementation framework. turkey has grasped a golden opportunity to get rid of the damage created by inflation with which it has had to live more than 30 years. the period of “ declining inflation ” is about to end. our next objective will be to achieve and preserve the price stability. this will be the most significant contribution of the central bank in mob

to manage liquidity risk prove insufficient. 12 in this regard, our surveillance has been closely monitoring for any signs of liquidity strains associated with the recent increases in spreads for high - yield corporate bonds, as well as for idiosyncratic events see adrian, fleming, shachar, and vogt ( 2015 ) ; and adrian, fleming, vogt, and wojtowicz ( 2016b ). see adrian, fleming, vogt, and wojtowicz ( 2016a ) ; and fleming ( 2016 ). see dobrev and schaumburg ( 2016 ). see bank for international settlements ( 2016 ). in particular, research has suggested that corporate bond funds exhibit herding behavior – that is, a tendency for waves of sales or purchases of common securities across funds. this herding appears more significant for less liquid bonds, which could exacerbate the concerns noted above. see cai and others ( 2015 ). also, see cetorelli, duarte, and eisenbach ( 2016 ) for estimates of the effects of asset fire sales. bis central bankers ’ speeches affecting particular funds in this segment, such as the events surrounding the abrupt closing of third avenue management ’ s focused credit fund last december. more broadly, the regulatory agencies in the united states and the financial stability board internationally have work under way focusing on possible fire - sale risk associated with the growing share of less liquid bonds held in asset management portfolios on behalf of investors who may be counting on same - day redemption when valuations fall. the recent proposal by the securities and exchange commission ( sec ) to ensure mutual funds have ample liquidity buffers under stressed scenarios and undertake measures to address the risk of heavy redemptions and fire sales is notable in this regard. our surveillance will continue to undertake more granular analysis of liquidity resilience and associated risks. across financial markets, it is difficult to disentangle the effects on liquidity of changes in technology and market structure and changes in broker - dealer risk - management practices in the wake of the crisis on the one hand and enhanced regulation on the other. while the leverage ratio and other dodd - frank act requirements likely are encouraging broker - dealers to be more rigorous about risk management in allocating balance sheet capacity to certain trading activities, the growing presence of proprietary firms using algorithmic trading in many of these markets, which predated the crisis, is also influencing trading dynamics in important ways. 13 the request for information issued by the