Developments in international financial markets and their effects on Turkish markets

Following 1970s, financial markets have taken a rapid transformationprocess.. by the help of free movement of capital due to the liberalization offinancial markets, technological and communicational developments, marketparticipants overcome the distance barriers, have the opportunity to take partin different markets and a gift of those factors, the clearinghouse system,clarifies the transactions.In this new environment made up of a new financial structure, the freemovement of capital lead to the integration of financial markets, which endedup with the development in one market would affect other markets. Althoughthis situation lets the investments gain the best value and lets the marketparticipants borrow with lower costs, it has created an unstable environment.In this new environment, where stability can change any time, makinginvestments have become more riskbearing and financial crises havebecome unavoidable.Turkey have come up with important financial crises in 1978, 1994 and2001. Also the Asian and Russian crises have seriously affected our country.The role of financial liberalization and globalization can be spotted behind thecrises in Turkey that encountered after 1980.Among the actions that should be taken to avoid financial crises or toprevent them getting deeper are; taxation of transactions, fixing exchangerates or determining the limits of exchange rates, multiple exchange ratesregimes (different exchange rates for capital and money markets),strengthening international banking regulations, prevention of capital loss,trading halts applications (the shut down of financial markets in the appeal ofcrises), target zone system (the prevention of unreal exchange ratefluctuations by an international cooperation). In addition to these thesettlement of an international informing system, increasing IMF quotas, theease of borrowing by IMF guarantee, the regulation of financial movements ina process like GATT could be the other precautions that should be taken.Another attempt to preserve the investors and control the financialrisks the new order carries, has been the Basel Convention. The workingcriteria of banks has been determined Basel I standards and in order toincrease the resistance of banks to crises, the sufficiency ratio that states theproportion of bank capitals to risky assets wouldn?t be less than %8 has beenset. By time the financial markets have grown up and the transactions havebecome more complex and Basel I criteria have become insufficient, so anew attempt for new standards have begun. The Basel II criteria that as aresult have been put into practice since the beginning of 2007, has carried uprisk focused capital management and risk focused credit analysis.To come up with the world markets, the macroeconomic stability, thatspread at the beginning of 2000 till year 2004, have been begun a newcorruption process with the increase in energy and other input and assetprices. In this corruption process, global foreign trade imbalances haveincreased. The inflationary influence of this situation has strengthened theexpectations that the global liquidity is shrinking as developed countries?monetary policy implementers? attempts to control inflation by increases inpolitical interest rates.Those developments affect the developing countries, which ourcountry is also within. The anxiety of dense capital outflows increases the riskpremiums and consequently the fluctuations in interest rates and exchangerates have been increased.