1970’s financial liberalization has been followed by the liberalization ofcommercial markets in the process of globalization.Liberalization of financialmarkets has caused the acceleration of capital flows and the increase of theirvolume. Capital that flows to developing countriessuffering from saving gaps haspositive effects on the economies when they enteredinto these countries and leadto destabilizations on their economies when they went out. The influences ofcapital flows, especially the ones of speculative capital, have been observed in thefinancial crises erupted in international level since the 1990s.By performing the financial liberalization, Turkeyhas tried to resolve the capitalgap problem with the entrance of foreign capital since 1989. Unfortunately, byincreasing its vulnerabilities, liberalization caused Turkish economy, which hasmacroeconomic weaknesses; to become open to destabilizing effects of capitalflows and global financial crises. The aim of thisstudy is to determine the effectsof capital flows on Turkish Economy.