There has been a tremendous increase in the importance of emerging market economies in the world economic landscape. They have also been quite resilient to the global financial crisis and were the main drivers of growth in the subsequent recovery. Despite their favourable economic outlook, however, the emerging market economies, both in the CESEE region and elsewhere, face a number of institutional and structural challenges which may jeopardize their recent success story. Whether they will be able to carry this success into the future depends critically on their success in dealing with various challenges, some of which we have touched upon in this chapter.
The recent experience of Turkey provides a good example. We have provided evidence that when the right institutional and structural steps are taken, the growth potential and stability can be significantly increased. A strong structural and fiscal position also provides room for monetary policymakers to effectively navigate their economies through turbulent times such as the recent global financial crisis. The newly designed ‘monetary policy mix’ of the CBRT also started to produce positive results in a short period of time. The unconventional monetary policies adopted by the CBRT are also a good indication of the institutional change in Turkey. The macro-prudential policy needs of Turkey are well addressed in this new policy framework which aims at reaching the main objective of price stability without ignoring financial stability in the medium and the long run. This chapter presents the new monetary policy framework adopted in Turkey against which the dimension of institutional and structural change in Turkey may be assessed.