all sectors. we are about to establish an economic structure for which measurements and criteria of the global market apply. in this scenario, the ease of uncertainties brings risk management and risk instruments into the foreground. from now on, each economic unit should assume and manage its own risk as in every sound market. this is the basic concept that underlies the development of derivatives markets in the world. secondly, i would like to focus on some concepts that are relatively new for our country ; namely institutionalization, accountability, transparency and, in this context, the importance of communication policies. both the institutionalization of the policies in implementation and transparency of the government agencies implementing these programs and sharing them with the public play a key role in easing the uncertainties in our economy. the third point regarding the changing process of the turkish economy i would like to share with you is the increase in confidence, which is actually an outcome of the issues that i have just mentioned. to clarify this point, public confidence in the economic policies in implementation and favorable expectations of the results of these policies have improved and are continuing to improve. the most concrete indicator of this confidence is that the inflation target is becoming a more credible nominal anchor for most of the economic agents. in other words, it is more commonly used as a reference. the existence of a strong nominal anchor in an economy, which can be used as a reference, helps to shape other economic variables. accordingly, volatility both in economic fundamentals and in other variables gradually decreases. as i have already emphasized at the beginning of my speech, this point is of great importance with respect to resolving the pricing difficulty arising from excessive volatility. moreover, today we are happy to see that economic units are now able to foresee longer terms and they are now able to carry out longer - term transactions. these developments are drastic steps for determining benchmark interest rates for pricing derivatives operations. thanks to the macroeconomic stability and structural transformation process, we have now reached the point where we can make risk management in a sound and healthy environment. the turkish derivatives exchange is the most important pillar and complementary element of this process. in all our presentations held in several anatolian cities, at the grand national assembly or in the council of ministers meetings since 2001, we, as the central bank, has pointed at the significance of the derivatives market and indispensability of these markets. dear guests, now that we have briefly considered the phase of uncertainty and the process of development of

shared with other economic agents. this structure enables a more effective resource allocation mechanism through more effective financial markets in the economy as a whole. besides their contribution to the effectiveness of the resource allocation mechanism, the development of derivatives markets helps the financial sector to grow. hence, derivatives markets contribute to the increase in national income and employment by indirectly encouraging more effective resource allocation and by providing value added. derivatives markets introduce new investment instruments to the financial intermediary system, or in a broader sense, to the financial system. this, in turn, increases the number of instruments investors can use in order to diversify their portfolios and thus deepens financial markets. if we analyze what the diversity in investment instruments means for our country, we see that thanks to the derivatives markets, both real sector and financial sector investors will be able to manage their risks in diversity in line with the world markets and this structure will help our country to integrate with world markets. here, i would like to draw your attention to the large number of studies that stress the favorable effect of the presence of sufficiently developed, deepened and efficient derivatives markets on foreign direct investments. dear participants, in addition to all these benefits derivatives markets provide to the economy, they bear extra importance as a complementary element of financial markets in terms of their interaction with monetary policy and thus with the central bank. as it is known, establishing financial stability is one of the most important factors to be considered by all central banks that have set price stability as their primary objective. in this framework, derivatives markets, which help to sustain financial stability through their contribution by reducing volatility in the markets, support central banks in maintaining financial stability. the second contribution of derivatives markets to the monetary policies of central banks is that thanks to their functions in risk management and in providing information, they expedite and activate the transmission mechanism used by monetary policy in giving direction to the economy. international swaps and derivatives association, news release on april 9, 2003. central banks adopt a long - term perspective in their target and try to affect the long - term movements of economic variables with the decisions they take. in this framework, it is crucial for a central bank to have as much information of a long - term nature about the economy and the future as possible. hence, derivative markets play a crucial role in enlarging the information set used in monetary policy via the information they provide about the future. the critical point here is that while derivatives markets enable the enlargement of the information set