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Cyclical behavior of price-cost margins in the Turkish banking industry

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  • Turgutlu, Evrim
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    Abstract

    Using a dynamic panel data framework, the cyclical behavior of the banks' price-cost margins in Turkey over the period 2002Q1-2008Q2 is analyzed. The findings provide evidence towards countercyclical behavior of the margins. This is important for the Turkish economy since the countercyclicality of banks' margins may deepen the contraction by constraining the credit opportunities over economic downturn periods. Furthermore, the control variables, monetary policy, market structure and financial deepening of the economy indicate significant effect on the price-cost margins of the banks. The findings also serve as evidence towards the "financial accelerator" mechanism in Turkish economy over the sample period.

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    File URL: http://www.sciencedirect.com/science/article/B6VB1-4XJW02S-2/2/b03533f7b71d9d278f5f2658f8e523ff
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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 27 (2010)
    Issue (Month): 1 (January)
    Pages: 368-374

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    Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:368-374

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Price-cost margin Business cycle Dynamic panel data Turkish banking industry;

    References

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    1. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
    2. Jackson, William E, III, 1992. "The Price-Concentration Relationship in Banking: A Comment," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 373-76, May.
    3. Marcos Lima & Marcelo Resende, 2004. "Profit margins and business cycles in the Brazilian industry: a panel data study," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 923-930.
    4. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
    5. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
    6. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    7. Satish Chand & Kunal Sen, 2000. "The business cycle, market structure and mark-ups: an Indian case study," Applied Economics Letters, Taylor & Francis Journals, vol. 7(4), pages 251-254.
    8. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
    9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    10. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    11. Machin, Stephen & Van Reenen, John, 1993. "Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 29-50, March.
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    Cited by:
    1. Ali Choudhary & Amjad Ali & Shah Hussain & Vasco J Gabriel, 2012. "Bank Lending and Monetary Shocks: Evidence from a Developing Economy," Working Papers id:4771, eSocialSciences.
    2. Amjad Ali & M. Ali Choudhary & Shah Hussain & Vasco J. Gabriel, 2012. "Bank Lending and Monetary Shocks: an Empirical Investigation," School of Economics Discussion Papers 0212, School of Economics, University of Surrey.

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