In this period, countries with relatively stable financial markets and lower deterioration in risk premia had more room for maneuver in their monetary policy implementations enabling them to make larger policy rate reductions. Raised awareness regarding the relative soundness of Turkey’s financial system in this period, coupled with the expected decline in inflation, set the ground for rapid and bold rate cuts. Acting accordingly, the Central Bank of the Republic of Turkey lowered policy rates more than any other emerging market central bank operating within an inflation targeting framework (Figure 12). BIS Review 103/2009  7  Figure 12: Change in Policy Rates of Developing Countries and the Relationship between Policy Rates and Risk Premium Change in Policy Rates (Percent, 1 Sep 08 - 24 July 09)  0.5  Change in Risk Premium and Policy Rates 2 (1 Sep 08- 24 July 09)  -0.5  0  1.5  Macaristan  Change in Policy Rates (Percent)  -1.5  -2  -2.5 -3.5  -4  -4.5 -5.5  Rusya Romanya Malezya Çek Endonezy Cumh. Tayland a Peru Polonya G.Kore Meksika Brezilya G.Afrika Kolombiya  -6  -6.5  -8  -7.5 Turkey Chile Columbia South Brazil Israel Mexico South Peru Poland Thailand Iceland Taiwan Indonesi China Czech Malaysia Romania Ukraine Russia Hungary  -8.5  -10 -100  Şili Türkiye  -50 0 50 100 150 Change in CDS (basis points)  200  Source: Bloomberg and CBRT.
Figure 24: Composition Unemployment  of  the  Change  in  Non-Agricultural  (Seasonally adjusted, Quarterly Difference, Thousand People) Participation to Labor Market Change in Employment Net Change in Unemployment  500 400 300 200 100 0 -100 -200 -300 1  2  3 2007  4  1  2  3 2008  4  1 2009  Source: TURKSTAT, CBRT. Recent data include signs of partial recovery in domestic demand conditions and economic activity in line with the policy rate cut cycle, accompanied by the financial measures (Figure 25). However, the negative effects of uncertainties in aggregate demand and low capacity utilization rates on investments and employment are expected to last in the upcoming period as well. Besides, high levels of unemployment are expected to restrict private consumption expenditures. In addition to these, considering the ongoing partial tightness in financial conditions, the Central Bank considers that the uncertainties pertaining to the strength and endurance of the recent partial revival in demand may not yet have come to an end.