. source : turkstat, cbrt. 17. the transformation that the turkish economy has undergone in the post - 2001 period has caused major changes in the employment structure. the share of the agricultural sector in employment was 35 percent in 2002, while, this ratio fell to around 23 percent in 2007. however, with the recent economic slowdown, this trend reversed temporarily and the share of agricultural sector in employment increased to approximately 25 percent in 2009. 18. while global turmoil took a heavy toll on industrial employment, it had a scant impact on employment in construction and services sectors. in 2009, industrial employment contracted by 7 percent, whereas, employment in the construction sector and services sector increased by 0. 6 percent and 1. 4 percent, respectively. employment by sectors ( percent ) farm no n - farm source : turkstat. 19. demographic changes in turkey leads to an increase in the share of the working population in the overall population and this, in turn, results in the unemployment to persist. however, the recent upsurge in the unemployment rate is mainly attributable to cyclical rather than structural factors. the economic contraction in 2009 increased the labor force participation rate while significantly curbing the pace of employment growth ; hence the unemployment rate increased rapidly. 20. the labor force is comprised of 23, 8 million people in 2008 and rose to 24. 7 million people in 2009 by an increase of 4 percentage points, whereas, employment increased by a mere 0. 4 percent, from 21. 2 million to 21. 3 million people. in this period, the rapid increase in labor force participation while employment remained much the same, caused the unemployment rate to climb to 14 percent in 2009 from 11 percent in 2008. meanwhile, the non - farm unemployment rate increased from 13. 6 percent to 17. 4 percent. 21. as i mentioned in my previous presentations, creating new employment opportunities for the growing labor supply in turkey is contingent upon carrying out cost - reducing and resilience - enhancing reforms in labor markets. these reforms, by promoting registered employment, will also help us overcome problems in our social security system. unemployment rates ( percent ) unemployment rat e non - farm unemployment rate source : turkstat, cbrt. distinguished guests, 22. the impact of the global economic crisis on turkey ’ s foreign trade has been evident, and the contraction in domestic and foreign demand and the slumps in commodity prices, especially in crude oil as well as iron and steel led imports and exports to shrink

that combines both price stability and financial stability as primary mandates even at times they conflict with each other and identify the policy instruments to target both. as you know central banks have typically used short - term interest rates as their primary policy instrument. however, the “ tinbergen rule ” suggests that this one instrument could be deployed to achieve only one target, which is conventionally recognized as price stability. addressing both price stability and financial stability simultaneously necessitates a second set of policy tools. this second instrument may be in the form of the supervision and regulation of financial activities. the question is that whether these responsibilities should be assumed solely by central banks. the downside of this option is that central banks may turn out to be too big, inflexible and in conflict with themselves, which eventually led to failure in both objectives. dear participants, prior to the global financial crisis, central banks were conducting monetary policy through conventional banks and use government bonds in open market operations. however the financial crisis led central banks employ a wider range of securities, ranging from corporate bonds to asset backed securities and mortgages. the reason behind this transformation was obvious. thanks to financial engineering and innovative products, only a small portion of financial institutions ’ assets is in government securities. therefore, asking for government securities as collateral in open market operations would no longer provide enough liquidity to the financial system. in the meantime, as banks have lost their dominance in the financial system, corporations and non - bank financial institutions have joined the conventional banks as the counter parties of central banks in market transactions. the question in this context is ( 1 ) whether the innovative policies we have seen in the last year will lead to longer - term changes in central banking doctrine and behavior, ( 2 ) whether in parallel to new developments in financial structure central banks will adopt a more flexible approach in operational practices, and ( 3 ) maybe more importantly whether central banks will maintain their influence in the financial markets, which has grown rapidly due to extraordinary actions during current crisis? these are important questions to discuss and i hope this conference would provide new insights to policy makers as we sail through uncharted waters. while concluding my remarks, i would like to extend my thanks to the members of the forum istanbul, who have contributed to the constitution of constructive criticism environment that i perceive as an important element in building the future of turkey. thank you for your attention.