Reserve Option Mechanism from Monetary Policy Instruments Being Implemented in Turkey

Short-term capital volatility is of particular importance for countries that has current account deficit. The volatiles short-term capital flows that contribute to finance the current account deficit caused financial fragilities. Developing countries, together with the increase in risk appetite after all the world under the influence of global financial crisis beginning in the US in the last months of 2008, faced with speculative capital movements.In this context, CBRT began looking for a new monetary policy tools to take control of volatile capital flows, to increase the economy's strength, to external financial shocks and to respond quickly to this shocks in solving these problems, CBRT has built two own policy tools. They are the Interest Rate Corridor and Reserve Option Mechanism (ROM). In this study, present monetary policy instruments are introduced, reserve requirements application and ROM are examined in detail and their place and importance and effects are discussed.