Abstract:

Financial crises that has started in the US in 2007 and spilt over to other countries has had significant effects on the emerging market economies (EMEs) as well. The EMEs have faced with especially short term capital inflows due to quantitative easing of the developed countries. The EMEs have taken macro prudential measures ranging from increase in reserve requirement ratios to levying taxes on capital flows against sudden stops of capital flows and their probable negative effects on the economy. Turkey, categorized among the EMEs, has used reserve requirements as an active monetary tool to limit the negative effects of capital flows on the financial stability. In this study, the use of reserve requirement ratios as a macro prudential policy tool by EMEs and Turkey case will be reviewed and its effects on the Turkish banking sector will be examined for the period from the rise of reserve requirement ratios to the regulation on the loan provisions by the Banking Regulation and Supervisory Agency on June 2011.

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