stanley fischer : dollarization keynote address by professor stanley fischer, governor of the bank of israel, at the 75th anniversary conference of the central bank of the republic of turkey " dollarization : consequences and policy options ", istanbul, 13 - 15 december 2006. * * * it is both a pleasure and an honor for me to participate in this conference of the central bank of turkey. in the first place, it is a pleasure to be at a conference of the central bank at a time when it is evident that monetary policy in turkey is succeeding in gradually bringing inflation under control. inflation is now around the single digit range, and given the experience in other countries – including israel – that struggled to subdue inflation, it is reasonable to expect that with a sustained and consistent monetary policy, and the continuation of the supportive fiscal policy, turkey will join other inflation targeting countries in achieving low single digit inflation. all this is a far cry from the situation during one of my most memorable visits to your country, on february 19, 2001, the day of the spectacular foreign exchange crisis that led to the shift to a flexible exchange rate regime and the beginnings of the inflation targeting approach to monetary policy. the turkish economy has come a long way since then, and the credit for that belongs both to the central bank and to successive turkish governments – both the ministers and the senior civil servants – who have demonstrated the ability to maintain fiscal discipline and continue the reforms that are transforming the economy and bringing it closer to its potential. of course, the imf too has made an important contribution to the success of this process, and i am happy that as a member of the fund and the fund team, i had the opportunity to work closely with the turkish authorities. second, it is an honor for me as governor of the bank of israel to be taking part in a conference on the important topic of dollarization, a topic of interest not only to the central bank of turkey, but also to us in the bank of israel, and to many other central banks and economies around the world. i will start by discussing the issue of full dollarization of an economy, that is the replacement of the national currency by a foreign currency, a process that has taken place in recent years in both el salvador and ecuador. i will then go on to discuss what must be the main topic of this conference – partial dollarization, with respect both to the assets and liabilities in the economy, and with respect also to the medium of exchange and the

and behaviours, interlinked with technological advancement ; and deepening european integration. 1 / 4 bis - central bankers'speeches for the bank, the last decade has been one of new policy development and implementation, of changes in our frameworks, of harnessing deeper and more diverse expertise, and of a growth in staff numbers. it has been a period of responding to change in the external environment, with an enduring commitment to our important public service mission. so the leadership challenge for my colleagues and i in the central bank is to act in a way that is balanced and proportionate, effective and fair and delivers the right outcomes. we operate in a market based economy and the central bank wants to see that the people of ireland, europe and the customers served around the world from ireland are served by a well - functioning system. so when the central bank's board, the central bank commission, of which i am a member, set out the central bank's strategy, it did so in a complex environment. we did this with a commitment to build on what has been achieved to strengthen the resilience of the financial system, enhance protections for consumers and investors, and support economic policy development. the decade ahead will see continued rapid change in economies and in the financial system, driven by technology, by changing demographics, the imperative of responding to the climate and biodiversity emergencies, and a more uncertain world. this requires us then to accelerate our own pace of change to deliver on our mandate and to meet the public's expectations of us. and it requires us to do so in a considered and deliberate way. our strategy then has four connected themes, safeguarding, future - focused, open & engaged, and transforming. they represent a renewal and repositioning to ensure that our direction and ambitions are responsive and forward looking. i'll reflect upon them briefly. firstly, safeguarding. the stability of the financial system and the effective regulation of financial services and markets, while ensuring that the best interests of consumers of financial services are protected, is at the core of our mandate and our work. this word, " safeguarding ", sums up the public's expectations of the bank and its staff and so it takes a central role in our strategic execution. secondly, future - focused. a rapidly changing world, economy and financial system requires a shift in our focus, our analysis and our frameworks. a forward looking approach will mean anticipating and responding proactively to changes in the economy and