THE EFFECT OF FINANCIAL REGULATIONS ON FINANCIAL CRISES

Abstract

The Turkish economy has been exposed to crises in various periods since the Republican period. Although the reasons for the emergence of crises show differences over time, it is observed that the reasons used to explain the occurrence of crises arise from problems that have emerged over time but cannot be solved. Various regulation applications have been made in order to eliminate the effect of financial crises. The main goal in regulation practices is to increase social welfare. For this purpose, discretionary regulation practices and financial liberalization have been preferred in order to regulate the financial sector and thus to prevent financial crises. In addition to the fact that the regulation has an important role in getting out of the crises, it also has the risks of increasing the cost of implementation and not achieving its purpose. This study aims to draw attention to the effects of financial liberalizations and financial regulations on financial crises and to reveal this effect through studies in the literature. As a result of the study, it has been concluded that the regulations play a very effective role in getting out of the crises when they are applied effectively and according to the conditions of the countries, however, there is an increase in the cost of implementation and the risk of not reaching the goal. In the literature, it has been determined that there is uncertainty about measuring the benefit from regulation. It has been understood that the reason for this is the difficulties in measuring the benefit of regulation. In order to solve this problem, instead of measuring the benefit of regulation, it has been focused on minimizing its cost. It has been concluded that more field studies are needed on the effects of financial regulations on financial crises.