Since higher exchange rate volatility relative to inflation volatility decrease the hedging benefits of foreign currency assets 11 this monetary policy framework can be said to help the process of “liraization”, a term that was suggested by Dr. Leiderman at the conference on “Inflation Targeting: Performance and Challenges” hold by the Central Bank of Turkey at the beginning of this year. 9  Bahmani-Oskooee, M.; Domaç, I.; “On the Link Between Dollarization and Inflation: Evidence from Turkey”; The Eighth Dubrovnik Conference on Monetary Policy and Currency Substitution in Emerging Markets; Dubrovnik; June 27-29, 2002. 10  Leiderman, L; R. Maino and E. Parrado (2006); “Inflation Targeting in Dollarized Economies”; IMF Working Paper, WP/06/157. 11  Bahmani-Oskooee, M.; Domaç, I.; “On the Link Between Dollarization and Inflation: Evidence from Turkey”; The Eighth Dubrovnik Conference on Monetary Policy and Currency Substitution in Emerging Markets; Dubrovnik; June 27-29, 2002. 4  BIS Review 124/2006  Here, I want to make a point on the floating exchange rates. The floating exchange rate regime has transferred the exchange rate risk to the market and made economic agents to perceive and understand the importance of risk management and using hedging instruments and derivatives market better. In this context, as we have mentioned in several platforms, the opening of the Turkish Derivatives Exchange Market in February 2005 has been an important step. Accordingly, promoting the use of this Market by a wider range and the development of the hedging instruments further are very important for both the financial stability and dedollarization.
I hope you enjoy both the conference and your stay in Istanbul. Thank you very much. 12  Provisional data. 13  Reinhart, C.M; K.S. Rogoff and M.A. Savastano; 2003; “Addicted to Dollars”; NBER Working Paper Series; No:10015. 14  Ize, A. and E. Levy-Yeyati (2005); “Financial Dedollarization: Is it For Real?”; IMF Working Paper; WP/05/187. BIS Review 124/2006  5