tem. 08 may. 08 mar. 08 oca. 08 kas. 07 eyl. 07 tem. 07 may. 07 mar. 07 oca. 07 kas. 06 eyl. 06 tem. 06 may. 06 mar. 06 oca. 06 kas. 05 eyl. 05 tem. 05 may. 05 mar. 05 oca. 05 source : cbt. since the central bank can directly control new turkish lira liquidity, it can support smooth functioning of financial and credit markets by providing the required liquidity. as for foreign exchange liquidity developments however, external conditions are more influential. in fact, in a period when uncertainties surrounding the global economy are at high levels, the central bank adopted the strategy to use foreign exchange reserves to primarily support the foreign exchange liquidity of our banking system. within this framework, the central bank resumed its activities as an intermediary in the foreign exchange deposit market ; lending rates of this market was reduced and maturities were extended. besides, during periods of ailing price movements, foreign exchange liquidity was injected via foreign exchange selling auctions. moreover, it has been declared to the public that if deemed necessary, additional measures might be taken to ensure that the financial markets function efficiently. all these measures have helped contain the effects of the global financial turmoil on the domestic economy. the central bank will continue to take the necessary measures, provided that they do not conflict with the price stability objective. in the last quarter of 2008, global financial conditions have been tighter than required by the stance of monetary policy, owing mainly to the intensification of the global financial crisis. turkey has also been undergoing a similar process. in this context, the central bank recently made a measured cut in short - term interest rates, in order to offset the extra tightening in monetary conditions. in order to be able to comprehend the monetary policy decisions of the central bank, the nature of the shocks to the economy should be analyzed properly at the outset. for instance, while an unexpected and strong monetary tightening was implemented in the face of capital outflows in the may - june 2006 period, an expansionary monetary policy was adopted following capital outflows in the last quarter of 2008 ( chart 4 ). the contradiction between these two responses can be explained mainly by the significant differences between the said two periods in terms of both economic conjuncture and the sources of the shocks. as both domestic demand and external demand were strong

come out of thin air. they were born out of the disastrous economic performance of the region during the 1980s, and – 3 – the realization that only dramatic improvements in economic policies would suffice to allow growth and prosperity to take hold. first, there has been a general acknowledgment, and recent reinforcement of the lesson, that prudent fiscal policy is crucial to economic stability, and several of the economies of the region have made significant strides in this direction. while much is left to do in this sphere, it does appear that many countries have learned the benefits of prudent fiscal policy. fiscal deficits in most countries in the region have dropped, and in cases where they have not yet declined, serious attention toward achieving improvements is being mustered. improvements in budget balances have not been achieved without pain. in many countries government payrolls have been slashed, generous transfer and subsidy programs have been cut, and social expenditures have had to be reduced. on the other hand, the realization has become widespread that in the absence of such budget - cutting measures, employment and wages would become even more depressed. moreover, people have found that many of the actions taken to cut budgets, including privatization of money - losing state enterprises, has led to better service and an improved quality of life. second, there has been a substantial dismantling of the controls imposed by government over private sector prices and wages. it is now widely understood that excessive budget deficits and money creation are the root causes of inflation, and controls over private prices have been generally abolished. governments also have largely scaled back their role in private wage negotiations as well. public controls on privately contracted interest rates and other financial market prices also have been eliminated for the most part. finally, exchange rates in many latin american countries have become more flexible, and where the government still intervenes in foreign exchange markets, there is a greater understanding that such intervention must be underpinned by appropriate fiscal and monetary policies. third, the role of the government in other aspects of the economy has been substantially diminished, with an accordingly greater scope allowed for private activity and for competition from abroad. internally, many countries have privatized major businesses. the privatization of telebras, the brazilian telephone company, is a prominent recent example, and privatization has proceeded even further in other latin american countries. such privatization has in many cases been complemented with legislation opening particular sectors to greater and fairer competition. additionally, trade barriers have been removed in many