Hedge funds, hot money movements and money crisis: Turkey example

In the 1990s associated financial liberalization with increased its speed, capital flows were in the form of portfolio investments were directed towards developing countries where investment profits were high. The hot money which is rapidly entering, increases domestic production and provides the necessary financial resources for financing investments and domestic debt. However, the sudden outflow of hot money from the country causes financial crisis by disrupting the financial stability and balance of payments account. Hedge funds enter the markets of country in the form of hot money flows as the short-term portfolio investments. Hedge funds have the power to change the balances in the financial markets with the using their high leverage rates, the strategies and the financial derivatives. Sudden fluctuations in hot money movements in countries where financial markets were not able to yet completed their development are a trigger factor in possible money crises. After 1980 Turkey's economy with of January 24 decisions has been removed the obstacles to capital movement, Turkey completely liberalized the foreign exchange regime with 32th decision in 1989 and thus the financial system was harmonized with international financial integration. However, as Turkey's economy after 1990 was not have the financial capability able to take under the control of short-term very quick moving foreign capital has had financial crises consecutively. Though the hedge funds have increased their effectiveness and popularity in the world markets with the globalizationare have not sufficiently well known in Turkey yet. As the alternative investment instruments such as hedge funds chooses the developing country markets like Turkey after the financial integration making the necessary measures and legal regulations regarding these funds are necessitate. The purpose of our study is to understand the effect of hot money flows and hedge funds, which are hot money, on possible money crises and through examining the structure of hedge funds in detail in Turkey is to analyze the feasibility. In this context, as a result of financial liberalization after 1989, hot money flows and hedge funds that increase their density with the change in financial structure, effect on currency crises for Turkey in the period covering the years 1989-2020 were examined by world examples light.