FİNANSAL PİYASALAR VE KURUMLAR

According to Mishkin (2012), “a financial crisis occurs when an increase in asymmetric information from a disruption in the financial system prevents the financial system from channeling funds efficiently from savers to households and firms with productive investment opportunities”.

These two balloons suddenly burst out in 1720 and thousands of unsuspecting investors went bankrupt.

The 1929 Crisis was the cause of unemployment, economic contraction, and stagnation.

A demonstration of government inexperience was the government’s insisting on adhering to the gold standard. The government refused to print money and followed a tight monetary policy, and economic activity ceased when the money was not available on the market, and the real sector shrank. This means more unemployment, less income.

According to the advocates of this idea, President Hoover did not approve the state intervention of the economy according to the liberal economy concept, which was prevailing in the 1920s.

The world debt crisis emerged on 12 August 1982 when Mexico declared a moratorium. Following this incident, many developing countries, mainly Latin American countries, declared moratorium and thus the world recognized the existence of the global debt crisis.

In October 1973, with the start of the Arab- Israeli War, Arab states stopped oil shipments to the US and Western European countries. Shortly after that, OPEC increased oil prices dramatically. The oil demand that grew in 1973 and the lack of and alternative energy sources caused western economies to experience a significantly expensive cost. This development caused inflation and balance of payments problems around the world as the crisis increased developed countries’ production costs very rapidly. As a result, inflationary pressures in developing countries increased steadily and the crisis began to be felt more deeply.

Weaker production structures and increasing costs emanating from the actions of the OPEC further increased the balance of payment deficits of the undeveloped and developing countries. On the other hand, some of these countries applied to Ponzi finance and thus tried to pay back its existing debts through new debts. When the signs of the international debt crisis emerged, the debtors (lenders) made some arrangements in lending policies (such as floating interest rates) to guarantee their receivables as well as to encourage borrower countries to set up and mobilize effective external debt management mechanisms to repay their debts.

With the impact of low interest rates, financial institutions took more risks and started to market the mortgage loans for low-income households in order to earn more profits and another reason for this crisis was the lack of transparency according to Mehrez and Kaufmann.

Although the most painful period of the crisis was relatively short, just as a severe heart attack, it lasted for long enough to cause permanent damage to the industrialized countries that were at the center of the crisis. In this framework, the damage was in three main forms:

In this process, Turkey experienced both an economic and financial crisis at the same time facing the due date of the debt rollover problems. The payments system collapsed and the securities and money markets transactions stopped, especially because the state banks could not fulfill their obligations in the money markets. 

Since we are faced with asymmetric information problems in financial markets, regulations became a fact of life. Regulation is concerned with changing the behavior of regulated institutions. Regulatory frameworks in regarding financial institutions utilize:

Financial crises are usually caused by the following factors :
• Mismanagement of financial liberalization
• Asset Price bubbles or booms, meaning market prices of assets realized above economic values
• High uncertainty, usually following economic downturns or stock market crashes
• Current account deficits
• Budget deficits
• Excessive borrowing of government
• Excessive borrowing of businesses
• Vulnerability or fragility of banking industry

The effects of the financial crisis, in general, may include:
• Economic downturn
• Deterioration of cash flows
• Decline of lending
• Deterioration in the balance sheets of financial institutions
• Deterioration in the balance sheets of businesses
• Currency crises
• Rises in debt burdens
• Bank failures
• Company failures
• Increased volatility in financial markets
• Rises in inflation and interest rates
• Rises in unemployment

The main objective behind the introduction
of the Basel II Accord was to narrow the gap
between regulatory capital requirements and
the economic capital produced by the banks’
own internal models.

The 21 February 2001 crisis, which was also a foreign currency crisis, was mainly caused by high increases in the current account deficit.

In this context, between 1930-1939, the economic policies implemented in Turkey were based on protectionism and statism.

During Turkey’s currency crisis in 1994,output fell 6 percent, inflation rose to threedigit levels, the Central Bank lost half of its reserves, and the exchange rate (against the U.S. dollar) depreciated by more than half in the first three months of the year.

The 21 February 2001 crisis, which was also
a foreign currency crisis, was mainly caused
by high increases in the current account
deficit.

The Stability and Growth Pact, the Maastricht
Treaty, and the European Union focused
on the government debt and budget deficit
ratios ignoring the “excessive” debt ratios in
the private sector and this situation triggered
crisis in the financial sector.