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Interactions between bank behavior and financial structure: evidence from a developing country

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Author Info

  • Bakis, Ozan

    ()
    (Galatasaray University Economic Research Center)

  • Karanfil, Fatih

    ()
    (Galatasaray University Economic Research Center)

  • Polat, Sezgin

    ()
    (Galatasaray University Economic Research Center)

Abstract

We use time-series analysis to examine bank behavior with respect to credit supply employing both banking data and other financial variables for the Turkish economy over the 1990 – 2009 period. We provide a vector error-correction (VEC) model to test for multivariate cointegration and Granger causality. More specifically, this paper seeks to fill the gap on how the bank behavior interacts with the financial structure given the conditions of macroeconomic policy. Our findings suggest that Granger causality is present between credit-deposit ratio and maturity of time deposits which implies that depositor decision on maturity changes the composition of balance sheet of banks leading to low credit creation. This result implies that macroeconomic uncertainty and instability lead to a kind of credit contraction with the decrease of deposit maturity. Our results also reveal that economic cycles are credit-driven in Turkey.

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Bibliographic Info

Paper provided by Galatasaray University Economic Research Center in its series GIAM Working Papers with number 12-1.

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Length: 20 pages
Date of creation: 21 Mar 2012
Date of revision:
Handle: RePEc:ris:giamwp:2012_001

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Keywords: Credit-deposit ratio; deposit maturity; Granger causality;

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  1. Hakan Kara & Fethi Öğünç, 2008. "Inflation Targeting and Exchange Rate Pass-Through: The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 52-66, November.
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  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  14. Bussiere Matthieu & Fratzscher Marcel & Koeniger Winfried, 2006. "Uncertainty and Debt-Maturity in Emerging Markets," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-28, March.
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