economic transactions by protecting property rights, enforcing contracts, and organizing the physical and regulatory infrastructure to facilitate economic activity. good governance provides a very important set of pillars, which are critical in the design of an economy. the most widely cited ones are transparency, accountability, rule of law and participation. let me go over these four principles rather quickly. transparency ensures that the necessary information is freely available and directly accessible to those who will be affected by decisions and their enforcement. accountability is a mirror image of the authority. it is critical for decision makers to be responsible for the consequences of their decisions and actions to those who will be affected. in democracies, every independent institution or organization is accountable to the public and to its institutional stakeholders. participation is the cornerstone of democracies, where every person in the system, in one way or the other, has a voice in the decision - making process. and last but not least, good governance requires a fair legal framework and impartial enforcement of this legal system that protects property and individual rights and constitutes a strong base for prudent policy - making. the rules need to be preset, predictable and applied equally regardless of whether the parties in dispute are domestic or foreign, individuals or state. enforcement of rules in speedy and impartial manner would create a self - fulfilling environment, where adhering to contracts voluntarily becomes the norm and there is little need to formally recourse to the legal system. how can we match governance practices with the current financial turbulence? it is too early to make a judgment about the institutional failures that have led to current financial turbulence, but we have a few clues on what went wrong. lack of transparency and accountability is at the top of the list. in retrospect there were some important gaps in the u. s. regulatory structure that caused poor underwriting and some fraudulent practices in the sub - prime mortgage sector. parties in the originate to - distribute chain did not have incentives to generate and provide information on the quality of assets. we can add poor investor duediligence practices and poor performance of credit rating agencies to that list. public disclosures required of financial institutions were not enough to shed light to the risks associated with their on - and off - balance sheet exposures. public authorities were way behind in assessing and regulating the complex financial instruments created by financial engineers. of course, accommodating global monetary and financial conditions also contributed to highrisk appetites, high leverage and search for high yields.

durmus yilmaz : in search of an appropriate policy mix for emerging economies – monetary policy in turkey in the aftermath of the global financial crisis speech by mr durmus yilmaz, governor of the central bank of the republic of turkey, at the euromoney central and eastern european forum, vienna, 18 january 2010. * * * dear guests, during the global financial crisis, almost all countries focused on containing potential adverse effects of the crisis on domestic economy ; turkey was not an exception. following the intensification of the crisis, the central bank of turkey ( cbt ) delivered sizeable and frontloaded cuts in policy rates, reaching 1025 basis points from november 2008 to november 2009. during this period the cbt not only cut policy rates rapidly, but also pursued a counter - cyclical liquidity policy to support the functioning of money and credit markets, thereby strengthen the impact of the rate reductions on economic activity. these efforts were successful in bringing back turkey on a strong recovery track. the healthy household balance sheets and solid banking system allowed a rapid rebound in domestic demand. starting from mid - 2009, the turkish economy has been facing a domestic demand driven rapid recovery. meanwhile, strengthening capital inflows has further exacerbated the divergence between the domestic and external demand, creating new policy challenges. rapidly widening current account deficit coupled with short term capital inflows and exchange rate appreciation called for a different approach to monetary policy. in order to cope with this new situation, we have slightly modified our existing framework of inflation targeting by explicitly highlighting the increasing role of financial stability in our objective function. accordingly, first we have announced the details of our exit strategy from crisis measures in april 2010. as a first step, we have normalized the liquidity support facilities and brought back the try reserve requirement ratios to pre - crisis levels of 6 percent. second, we started to highlight the macro financial risks and contingent policy responses. for example, we have stated through our policy documents that, if divergence in growth rates between domestic and external demand continues in the forthcoming period, and if this pattern of growth coexists with rapid credit expansion and deterioration in the current account balance, it would be necessary to utilize other policy instruments such as reserve requirement ratios and liquidity management facilities more effectively. the primary objective of the cbt is to achieve and maintain price stability. however, the recent crisis has taught us that this single objective may not be enough for attaining macroeconomic and financial