Investigation of 2007-2009 global financial crisis and macroprudential policy implementations in Turkey after the crisis

When examining monetary policies which are applied globally pre-global financial crisis, usually a price stability-oriented structure stands out. Hence, within the aforesaid structure, financial stability is either kept in the background or even sometimes completely neglected. The prevailing opinion among central banks is that, both macroeconomic and financial stability would spontaneously actualize, in case of abiding price stability target strictly. However, global crisis broke the routine for monetary policy and a new period concerning monetary policy and financial regulations started. This crisis clearly revealed that central banks should pay regard to financial stability along with price stability and not be remain deaf to asset price exuberances. The purpose of this study is to examine the 2007-2009 global financial crisis and reveal the reflection of crisis on central banking. In line with this purpose, primarily; the cause of the crisis, policies applied in the course of coming out of the financial crisis, lessons taken from crisis regarding monetary policy strategy and, the role of central banks in the management of the asset price bubble are examined. Thereafter, beginning from the late 2010 of Central Bank of the Republic of Turkey (CBRT), detailed information regarding new policy strategy which is designed as pursuing a supportive goal for financial stability without making concession on price stability, are given. It is seen that, when required, asymmetric interest rate corridor, reserve requirements and reserve option mechanism are being used as a countercyclical macroprudential tool, by CBRT. After the application of macroprudential policies, it is concluded that, sensitivity of Turkey towards global factors is majorly decreased and new policy strategy is succeeded considerably. Keywords: Global Financial Crisis, Financial Stability, Asset Price Bubble, Macroprudential Policies