structural reforms and the prudent macroeconomic policies has also triggered efforts to reduce the size of the public sector in the economy. in the last five years, the private sector has been the engine of the economy and the main contributor of the high growth rates. the public fiscal management and control law, the public procurement law and the multi - year budgetary framework have been put into practice in order to enhance the fiscal policy and the incomes policy of the public sector. hence, this structure has created a reliable base for the tight fiscal policy involved high primary surplus targets that have been achieved and maintained since 2003. the banking sector reform, the fdi investment law, and the law on the protection of intellectual and industrial property rights are on the list of structural reforms that have produced macroeconomic and financial stability and increased the resilience of the economy against external shocks. now, the turkish economy is not one that is crisis prone. distinguished guests, the good governance not only defines the rules of the game but also initiates and determines the structure of institutions. however good the policies may be, if the capacities of the institutions implementing these policies are not matching the rigour of the policies, the policies will not be able to deliver what expected of them. if i am to repeat myself once more, in the light of the structural transformation in the turkish economy during the last five years, i can easily say that turkey is a clear example of the view that governments need to assume a leading role in changing and reforming the existing institutions and in setting up brand new ones. in this respect, newly established independent authorities charged with regulating markets from competition to public procurement and to energy matters might be cited as good examples. however it goes without saying that the most prominent institutional change that took place is the amendment of the law of the central bank of turkey, which made it independent. the manifestations of the independence of the central bank in the form of greater transparency and accountability together with the inflation - targeting regime contributed to the implementation of a rulebased monetary policy. after the thirty - year period of high inflation, we have experienced single - digit inflation rates. an independent central bank has constituted and will continue to constitute a corner stone for the structural transformation towards good governance and good institutions in turkey. the central bank of turkey aims to match the expectations by being a good institution through its independent, transparent and accountable status, policy implementations focused on its sole mandate of price stability and by practices to increase efficiency in institutional design. distinguished guests

of limitations was that simple rules do not take account of riskmanagement considerations. as shown in figure 2a, the core cpi inflation rate for 2003 was falling toward 1 percent. the real - time reading of the core pce inflation rate ( not shown ) was on average even lower than the comparable cpi figure. given these rates, the possibility of deflation could not be ruled out. we had carefully analyzed the japanese experience of the early 1990s ; our conclusion was that aggressively moving against the risk of deflation would pay dividends by reducing the odds on needing to deal with the zero bound on nominal interest rates should the economy be hit with another negative shock. this factor is not captured by simple policy rules. a final note i have offered this analysis in the spirit of so many of the discussions i have had with john. his framework has been enormously important to policymaking in the federal reserve, and it has yielded many benefits. nevertheless, it's important to keep in mind that some significant practical limitations also are associated with the application of such rules in real time. in other words, it's not so simple to use simple rules! references orphanides, athanasios ( 2003 ). " the quest for prosperity without inflation, " journal of monetary economics, vol. 50 ( april ), pp. 633 - 63. poole, william ( 2007 ). " understanding the fed, " federal reserve bank of st. louis, review, vol. 89 ( january / february ), pp. 3 - 14. taylor, john b. ( 1993 ). " discretion versus policy rules in practice, " carnegie - rochester conference series on public policy, vol. 39, pp. 195 - 214. _ _ _ _ _ _ _ _ _ ( 2007 ). " housing and monetary policy, " speech delivered at " housing, housing finance, and monetary policy, " a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 30 - september 1.