TÜRK EKONOMİSİ

The spread and severity of economic crises among countries depend on their international economic relations, which are measured with international goods flows (foreign trade); international service flows (tourism, transportation, consultancy, etc.); international factor flows and international capital flows.

A financial crisis is often associated with one or more of the following phenomena:

• 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 di erent financial crisis definitions depending on the source to distinguish them. ese are currency crisis, banking crisis, systemic financial crises, and sovereign debt crisis.

It is often called sudden stop or capital account or balance of payments 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

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.

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”.

The sovereign debt crisis is the government’s failure to pay internal and external debts belonging to the public and private sectors. Sovereign debt crises occur when the combination of the level of a government’s debt and the prospects of continued fiscal deficits couple to raise doubts about its ability or willingness to pay o all of its obligations at face value.

In III it says that  "the government’s failure to meet its debt obligations will increase capital inflows" which  is unlikely. So any choice including III is wrong.

Orthodox economic policy is a term that refers to the application of conventional and traditional economic policy. 

These policies do not contradict the logic of the market economy as they are experienced policies.

Orthodox stabilization programs are recommended to countries to overcome high inflation and balance of payments problems in the 1950s and 1980s.

Turkey implemented an IMF-supported orthodox stabilisation program on August 4, 1958, to achieve price stability and troubleshoot the balance of payments. The decisions taken within this framework can be brie y listed as follows 

As of August 4, 1958, the multiple currencypractices were introduced in foreign exchange transactions. ere were di erent exchangerates for export and import. Turkish Lira (T) was devalued in proportion of 68.9%.

Foreign trade was liberalized, that is, exportand import transactions facilitated, and imports were allowed to be done quarterly.

A strict monetary policy was implemented.e loans extended by commercial banks and the Central Bank were limited.

Tight fiscal policy had been applied, it had been aimed to reduce public expenditures and achieve budget balance. However, this policy could not be maintained.

The prices of PEE products increased, thereby aiming to reduce operating losses that impose a burden on the budget.

Difficulty in external payments was eliminated with the stabilisation program. 420 million United States dollars ($) foreign debt was postponed or consolidated and Turkey borrowed $359 million from the USA, OECD, and IMF.

Some of the decisions taken in the stabilization program in 1978 and 1979 are as follows :