: the decoupling theory held that because of the substantial rise in foreign exchange reserves, the improved policy framework, robust corporate balance sheets and a relatively healthy banking sector, emerging economies could steam ahead on their own even if advanced countries went into recession. the reality turned out to be otherwise. we've seen in the last several months capital flow reversals, sharp currency depreciations, and a widening of spreads on both corporate and sovereign debt. the decoupling theory was never totally persuasive in a globalising world and its credibility has been seriously dented by the events of the past few months. we should now have a modified decoupling theory which is that if the downturn in advanced economies is relatively mild, then emerging economies could do enough through policy responses to insulate their economies. but if the downturn is severe, they will be impacted, of course differently in different economies. again, india has not been able to decouple through this crisis not so much because demand collapsed, but because we have been impacted through the finance channel and through the confidence channel. because capital flows, which have been larger than our current account deficit over recent years, have substantially declined in the wake of the crisis. cb : do you think that scenario would change if domestic consumption in the likes of india or china was boosted? ds : i can't comment on china. but as far as india is concerned, our consumption at 57 % of gdp is relatively high for an economy of our per capita income level. so the important thing for india is to increase investment, especially in infrastructure, and not so much consumption. i admit that private consumption has to go up as indicator of poverty reduction, but what is more important is that investment increase. cb : could you clarify your position on the stability of the current international monetary order? ds : i have studied the debate about the dollar as the reserve currency, whether there could be alternatives to that, what are the implications for the world economy and for emerging economies. at this time i'm not sure if there is a currency that can replace the dollar. in any case, replacing the dollar can't happen by fiat. it has to happen on the strength of that alternate currency. but i do want to say that in terms of the international monetary order, we are facing a situation where finance is globalised, but we still have regulation at the national level. we need to look at the implications of this for monetary policy

compared to 2004. their outstanding economic performance and rapidly increasing share in the global economy over the past decade have considerably helped developing countries to have an increasing voice in the international arena. these countries, among which turkey, with its economic performance, stands as one of the leading countries, have weathered the recent global crisis with less damage compared to developed countries and exhibited better performance in reverting back to pre - crisis production levels and growth rates. recently, there have been debates about whether the developing country group has decoupled from developed countries. although the decoupling of countries seems highly difficult in a global environment where all countries get increasingly interpenetrated via capital flows and financial integration, it is a fact that developing countries have ended up in a much better position in the recent global crisis in comparison to their economic performance in the past crises. it would not be wrong to assert that the main reasons underlying this transformation are the increased commercial, financial and economic relationships among developing countries, accompanied bis central bankers ’ speeches by strong economic and institutional governance practices formulated in view of lessons learnt from past crises. the increase in the volume of trade among developing countries has reduced the adverse effects of the weak course of external demand from advanced economies. therefore, production and employment levels in developing countries have assumed a more rapid pace of recovery. at this point, by using turkey ’ s export data, i would like to exemplify the importance of diversification of export markets driven by improving relations with countries in the region. as it is known, the european union countries have the largest share in turkey ’ s exports. nevertheless, the share of member states of the organization of the islamic conference ( oic ) in turkey ’ s exports is rapidly growing. during the period between end - 2000 and end2010, while the share of the european union countries in total exports of turkey declined from 56 % to 46 %, that of oic member states rose from 13 % to 29 %. the significant increase in the share of oic member states in our exports might be, at first sight, attributed only to the economic slowdown in the european union. however, related figures indicate that the share of oic members in turkey ’ s exports had already increased from 13 % to 19 % between 2000 and 2007 before the start of the global financial crisis. besides, visa exemptions probably played an important role in the recent improvement in turkey ’ s trade with the region ’ s countries. distinguished guests, regional collaborations have made a significant contribution