TÜRK EKONOMİSİ

A financial crisis is often associated with one or more of the following phenomena (Claessens and Kose, 2013, 4-5):
• Substantial changes in credit volume and asset prices.
• Severe disruptions in financial intermediation and the supply of external financing to various actors in the economy.
• Large scale balance sheet problems (of firms, households, financial intermediaries, and sovereigns).
• Large scale government support (in the form of liquidity support and recapitalization).

Financial crises take place in various ways, and there are four different financial crisis definitions depending on the source to distinguish them. These are currency crisis, banking crisis, systemic financial crises, and sovereign debt crisis.

A currency crisis involves a speculative attack on the currency resulting in a devaluation (or sharp depreciation), or forcing the authorities to defend the currency by expending large amount of international reserves, or sharply raising interest rates, or imposing capital controls (Claessens and Kose, 2013, 12).

The sovereign debt crisis is the government’s failure to pay internal and external debts belonging to the public and private sectors.

The banking crisis may arise from the institutional structures of banks, namely their high leverage balance sheets, macroeconomic shocks, risky banking transactions, intense competition, poor management, institutional weakness and dependence on short-term foreign resources and as well as from bank runs (also called as a run at the bank). When the depositors believe that the bank is bankrupt, they run to the bank and withdraw their cash from deposit accounts. Bank run creates a self-fulfilling prophecy that speeds up the bank bankrupt, so the banking crisis occurs as this spreads to other banks (Claessens and Kose, 2013, 18; Yay, Yay and Yılmaz, 2001, 21).

In its most general usage, the term systemic crisis describes a shock to the financial system that impairs crucial functions of the system, such as asset valuation, credit allocation, and payments.

Systemic financial crises are the collapse of financial institutions, which have great and devastating effects on the real economy and prevent the efficient function of the markets (Yay, Yay and Yılmaz, 2001, 21).

The causes of systemic financial crises can be listed as follows: irrational piling-on of debt; moral hazard induced by mispriced government-provided deposit insurance; complex relationships among counterparties; an unwillingness of dealers to trade; a failure of the Central Bank to provide liquidity as needed; unpredictable adverse shocks that come from outside the financial sector; and bank runs” (Marshall, 1998, 13).

Depending on the current account deficit and the level of debt, sovereign debt crises reduce the economic growth rate and employment rate while it increases the interest rate, exchange rate, and inflation rate.

The First Generation of Crisis Models largely motivated by the collapse in the price of gold, an important nominal anchor before the floating of exchange rates in the 1970s, was often applied to currency devaluations in Latin America and other developing countries (Claessens and Kose, 2013, 12).

A financial crisis is often associated with one or more of the following phenomena (Claessens and Kose, 2013, 4-5): • Substantial changes in credit volume and asset prices. • Severe disruptions in financial intermediation and the supply of external financing to various actors in the economy. • Large scale balance sheet problems (of firms, households, financial intermediaries, and sovereigns). • Largescale governmentsupport(in theform of liquidity support and recapitalization).

Financial difficulty or a financial crisis leads to a serious deterioration in the real economy (on the production and distribution side). While financial-economic crises have common consequences such as economic downturn, unemployment, and corporate bankruptcies, many factors can cause financial crises

When the financial system does not perform its fundamental function effectively, certain bottlenecks occur, resources cannot be transferred to productive areas and the production capacity of the economy falls (Mishkin, 1996, 2). Consequently, financial difficulty or a financial crisis leads to a serious deterioration in the real economy (on the production and distribution side).

The currency crisis is the sudden and significant decline in the value of national currency

The Second Generation of Crisis Models was developed after the collapse of the European Exchange rate mechanism crisis (1992-1993) and the Mexican crisis (1994-1995) that cannot be explained by the first generation of crisis models.

These measures are called stabilization programs, and when governments get financial support from the International Monetary Fund - IMF, the IMF asks governments to comply with various stability programs that are regulated by the IMF.

Turkey launched various stabilization programs in 1958, 1970, 1978-1979, 1980, 1994, 1999, and 2000-2001 to overcome the economic crises.

The difference of the 24 January 1980 decision from the previous ones was to abandon the import substitution industrialization policy and adopt the export-oriented industrialization policy and to minimize government interference in the economy by making the free market economy work in the Turkish economy

Incentives were given to increase export revenues.

The 2008 global economic crisis also known as the global financial crisis arose when subprime mortgage loans, which were opened to low-income people in the USA in 2007, began to default at a high rate. These defaults caused a high rate of foreclosures, deteriorated banks’ balance sheets and caused a credit crunch where the banks became short of funds. As a result, the banking crisis occurred in the USA and with the collapse of the investment bank Lehman Brothers in September 2008, it turned into an international banking crisis. Soon after, it affected the whole world.