One could say that what we need to achieve is a “slow puncture”, where we gradually return to a more sustainable situation, with a considerable reduction of the risk of a household debt overhang causing problems. This is of course a substantial challenge and can hardly be managed unless several policy areas collaborate in the process. I have so far talked about the housing market mainly from a monetary policy perspective – where the main problem is that rising house prices are reflected in rising debt, which makes the economy more vulnerable to shocks. But there are of course other, more structural reasons why it is desirable that the housing market functions well. One is that a poorlyfunctioning housing market can lead to poorer geographical mobility, which can put a spanner in the works of the labour market. This has a negative effect on the conditions for growth.16 Another reason is that supply restrictions in the housing market result in an unjustifiable redistribution of wealth from future house buyers to existing house owners. The problems on the Swedish housing market have been debated for decades, but I perceive that the discussion has recently been particularly intensive.17 Perhaps the time is now ripe for some substantive political action? 15  A study by Jahnson and Lundberg (2013) estimates that prices on the Swedish housing market today are roughly one third higher than if construction had developed in the same way as in Finland over the past fifteen years.
The “Price Developments” report will be published on the working day following the announcement of inflation data. Beside these communication tools, speeches and presentations made by Central Bank autorities at the meetings in Turkey or abroad constitute an important pillar of the communication policy. Working papers, booklets and technical notes published along with the conferences and workshops organized by the Bank will be used as effective tools for communication policy. 1  The publication calendar for the Inflation Report and the Financial Stability Report along with the Monetary Policy Committee Meeting dates are presented in the Appendix. BIS Review 4/2008  5  Exchange rate policy and liquidity management Exchange rate policy and foreign exhange buying auctions Along with inflation targeting, the Central Bank will continue to implement floating exchange rate regime in 2008. As stated in the annual monetary and exchange rate policy announcements that have been published since 2002, the foreign exchange rate is neither a target, nor a policy tool in the floating exchange rate regime. Exchange rates are determined according to the supply and demand conditions in the market. The main factors affecting foreign exchange supply and demand are the monetary and fiscal policies implemented, international developments, economic fundamentals, and expectations. Even if floating exchange rate regime has been adopted, keeping a strong foreign exchange reserves position is very important in emerging economies like Turkey to eliminate the unfavorable effects of potential internal and external shocks and to boost confidence in the country’s economy.