INDEPENDENCE OF THE CENTRAL BANK OF THE REPUBLIC OF TURKEY

Abstract

The idea of establishing a NationalState Bank wasdiscussed at theTurkisheconomicCongress in 1923 aftertheDeclaration of theRepublic. In 1924, someattemptsweremadetoconverttheOttoman bank into a State Bank. In 1926, preparationswereinitiatedfortheestablishment of thecentral bank. Inaddition, theLaw of the Central Bank of Turkeywasadopted on June 11, 1930, andthe Central Bank wasestablished on October 3, 1931, andofficiallystartedworking on January 1, 1932. Inaddition, in thefoundationLaw of the Central Bank of theRepublic of Turkey, the main objective of the Bank wastocontributetotheeconomicdevelopment of thecountry. Inordertomakethisobjectiveactive, the Bank has beengivendutiessuch as executingTreasurytransactions, determiningtheaccrual rate, andensuringorder in themoney market. Themostimportantgoal of the Central Bank wastoensurethattheamount of money in circulationwasadjustedaccordingtotheneeds of theeconomy. Forthisreason, the Central Bank undertooktheduties of arrangingthemonetary market anddeterminingthediscount rate. Thewholeissue here is topreventgovernmentsfrommakingconcessions on short-termgoalsandpolicieswith a concern of voting. Monetaryandfiscalpolicies fail ifconcessionsaremade. How willthemonetarypolicy be determinedwiththePresidentandmembers of the Central Bank? Inparticular, theobjectives of the Central Bank should be determinedandlimitsshould be imposed on loanstothepublicsector. Inaddition, ifthe Central Bank is independent, it willholdthetargets of monetarypolicy in thecountry. Thesetargetswill be placed on theeconomyrailwithinthecountryiftheyaresupportediftheyare not disruptivetopricestability. Withinthis, thegovernmentmustremovethepressures on the Central Bank. Ifthesearedone, theinflation in thecountrywillreachthe minimum level. Inthisstudy T.C willfocus on thetransformation of thefunctions of the Central Bank withthelawenacted in 2001.