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Monetary Transmission and Bank Lending in Turkey

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  • Lokman Gunduz

Abstract

This paper analyses the role of bank lending in the monetary transmission mechanism in Turkey. We present evidence from a VAR-model estimated with monthly aggregate data covering the period 1986-1998. We find some evidence for the existence of the bank lending channel, though inadequate given the identification problem. We observe that following a monetary contraction, aggregate bank credit and securities holdings of the banks decline immediately much more than the money (deposits) does. The timing of impulse responses of the credits and output, and the results of variance decomposition seem to favour bank lending view. Moreover our results are also consistent with the traditional interest rate channel and the exchange rate channel.

Suggested Citation

  • Lokman Gunduz, 2001. "Monetary Transmission and Bank Lending in Turkey," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 5(18), pages 13-32.
    • Handle: RePEc:bor:iserev:v:5:y:2001:i:18:p:13-32
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