had not developed effective contingency plans. they did not anticipate the broad consequences of widespread deleveraging, forced asset sales that exacerbated the illiquidity in markets, or the broad loss of confidence that followed. it's now obvious that this inability to anticipate and prepare for extremely bad outcomes posed a significant risk to financial system stability. more robust risk - management practices, grounded in a longer - term, through - the - cycle perspective and appropriately designed stress tests, could have helped to prevent the buildup of leverage that became unsustainable. it has also become clear that riskmanagement models must take into account the collective impact of individual choices. for, without an understanding of this impact, there is a risk that core markets can close, liquidity can dry up, and the type of crisis we are currently enduring could be repeated. the regulator and the central bank can possibly help in this area. by running coordinated macroeconomic stress - test scenarios, they can observe the details of risk - management systems at individual institutions and may identify possible feedbacks that are missing in these systems. they could then disseminate the results of these exercises in a suitably aggregated form among risk managers at individual institutions, to help them internalize these externalities. the crisis has exposed some weaknesses and inconsistencies in the application of fair value accounting methods. first, the reliance on market valuations has the potential to amplify the boom and bust cycle in credit and asset prices, by creating a feedback loop between asset values and lending. second, the application of fair value methods in illiquid or inactive markets may distort information if the models or observable prices used for valuation are inadequate or inappropriate – a problem that is heightened during periods of market stress, when correlations break down. for example, as the liquidity of many markets became impaired in this crisis, there was considerable uncertainty about how to value certain assets and how to compare financial statements. the financial stability forum ( fsf ) – which includes senior representatives of national financial authorities from selected countries including canada, along with international financial institutions and standard setters – has called for improved guidance from standard setters in the use of fair value accounting at times when measurement is challenging, and for improved disclosure by financial institutions. accounting standard setters have since clarified their position and have proposed increased disclosure standards for the valuation of financial instruments. this is a good first step, considering how essential

turalay kenc : the turkish economic outlook and monetary policy – challenges and policy response remarks by mr turalay kenc, deputy governor of the central bank of the republic of turkey, at the eu ambassadors meeting, ankara, 28 january 2016. * * * i would like to start by thanking his excellency ambassador cornelis van rij for the opportunity to share with such distinguished audience some views about the turkish economy, the challenges stemming from a very volatile external environment, and the policy approach that has been implemented to cope with these challenges. the turkish economy has shown a relatively robust performance in the face of major external and internal shocks. gdp growth is estimated at around 4 percent in 2015 with an expected gradual strengthening of economic activity in 2016 and in 2017. the rise in gdp growth rate observed in 2015 is mostly attributed to strong private consumption. private investment recorded a moderate recovery. the challenging external conditions especially geopolitical events in the region have adversely affected exports. however, the economic recovery in most eu member states enabled turkey to largely compensate its loss in other exports markets as turkey increased exports to the eu countries by more than 10 percent in euro terms in 2015. this outcome also highlights turkish exporters ’ resiliency in adopting to adverse economic conditions. of course, probably the most significant development of the last year or so has been the sharp decline in oil prices. turkey, being an energy importing country benefited from lower oil prices in many dimensions. the current account deficit fell from $ 52 billion in june 2014 to below $ 35 billion in november 2015 in 12 month rolling terms. this sharp improvement in the current account balances is also greatly helped by prudent macro - economic polices including monetary, macro - prudential and fiscal policies. tight monetary policy, well - targeted macroprudential measures and strong fiscal balances have all contributed to lower levels of domestic demand by stabilizing loan growth and reducing risk taking behavior. going forward, the current levels in oil prices and depressed producer prices in most part of the world due to weak economic activity are expected to lead to further improvements in external balances. therefore, it is highly likely that turkey will record a current account deficit of below 4 percent of its gross domestic product in 2016, representing a major achievement in satisfying the norm of the european union ’ s macroeconomic imbalances procedure. unlike these positive developments in the economy, inflation increased and its outlook worsened in 2015 reflecting the pass - through from the tl