52 balance of payments crises experienced in the 1980 - 2001 period in 19 countries including turkey show that 51 of these crises erupted under managed floating exchange rate regimes. 1 thus, in almost all countries facing a balance of payments crisis it can be seen that pegged or foreseeable exchange rate regimes were being implemented. in addition, there were problems related to financial stability or the implementation of tight fiscal and incomes policies that were supposed to support the exchange rate regimes in these countries. a second issue i would like to touch upon is that the open positions of the banking sector are so low that they are even comparable to those of the past. within this framework, the amount of open positions of the banking sector is closely monitored and necessary warnings are given. meanwhile, the real sector should also be cautious about open positions. another important issue that needs to be kept in mind in relation to the current account deficit is that the central bank does not try to artificially keep the new turkish lira overvalued. us dollar 21. 7 billion worth of foreign exchange purchase since 2002 is an indicator of this. besides, short - term capital is not encouraged, and market players are continually reminded that the exchange rate risk lies in the market. moreover, the high level of foreign exchange reserves, the relatively low inflation environment achieved through tight fiscal and monetary policies and the distance covered in terms of macroeconomic stability are all indications of the changing circumstances. now, i would like to talk to you about a different dimension of the growth process, which i have already mentioned. sustainable growth we know that the growth process of the turkish economy was in the form of an expansion - contraction cycle, especially for the period until 2001. in the past, generally short periods of economic expansion used to be followed by drastic shrinkage. however, the fact that high rates of growth were attained three successive years, following the contraction in 2001, and that the rate of growth for this year is kaminsky, g. l. ve reinhart c. m. ( june 1999 ). the twin crises : the causes of banking and balance - of - payments problems. the american economic review, 89, 3, 473 - 500 and cbrt calculations. forecasted to be 5 percent show that this cycle has, to a large extent, been broken. yet, it is not possible to conclude that the turkish economy has entered a process of sustainable growth. the same as price stability ; sustainable growth is a vague notion to the turkish economy. sustainable

the coming periods. graph 9 : employment ( index for those employed in the manufacturing industry, 1997 = 100 ) 86, 0 85, 0 84, 0 83, 0 82, 0 81, 0 80, 0 79, 0 source : sis. a reflection of the high rate of growth recorded in 2004 was the increase in the current account deficit, as often discussed by the public. it is useful to point out before anything else that it is a natural outcome for economic growth above forecasts to widen the current account deficit. the realization of the rate of growth as 9. 9 percent in 2004, which had been forecasted as 5 percent, led to a parallel increase in the current account deficit above forecasts. however, the rise in the current account deficit today should not be interpreted as resulting in crisis as in the past. the world trend also supports this assessment : deepening of commercial and financial integration makes it possible for countries with macroeconomic stability to sustain higher current account deficits than before. within this context, in order to have a clear understanding of the situation turkey is in today, we need to reflect on what happened in the past. at this point, i would first like to give you a brief overview of what we experienced in the past. looking at the past, we see lax fiscal policies and monetary policies, which had to accommodate them. the latter was accompanied by pegged or foreseeable exchange rate regimes. the outcome of this scenario was high inflation and periods of volatile and unbalanced growth. in such an environment, expectations deteriorated because the public sector led the excessive increase in domestic demand, maturities were shortened and uncertainty increased, the current account deficit widened, and measures continued to fell behind. with the addition of the adverse trigger - effect of domestic or external factors to this environment, an increase in foreign exchange demand and pressure on the foreign exchange reserves of cbrt was inevitable, resulting in crises and devaluation. however, the present circumstances of the turkish economy are very different from those of the past. to start with, as you all know, unlike the past, a floating exchange rate regime is being implemented. the most apparent feature of the floating exchange rate regime is that it is shock - absorbent. in other words, changes in the demand or supply of foreign exchange are reflected in the level of the exchange rate, and in contrast to pegged or foreseeable exchange rate regimes, the exchange rate goes up or down. the analysis of a total of