COVID-19 and its impacts on financial inclusion in developing countries

Purpose: The primary objective of this study is to examine the impact of the COVID-19 crisis on the Turkish banking sector. Leveraging empirical data, we aim to assess how the pandemic influenced the performance of the Borsa Istanbul Banking Sector Index (BIST) from January 2020 to December 2021. This analysis seeks to provide valuable insights to guide decisions in economic policymaking and investment strategies, shedding light on the specific dynamics that shaped the Turkish financial landscape during this tumultuous period. \n \n Method: Our research methodology entails the concurrent use of the Borsa Istanbul Banking Sector Index (BIST) and daily COVID-19 case data. To analyze the pandemic's effects on the banking sector, we employed the Heteroskedasticity-Conditional Autoregressive Generalized Exponential (EGARCH) method. This sophisticated statistical approach allows for precise and rigorous evaluation of volatility changes and market reactions within the Turkish financial market amid shocks induced by the global health crisis. \n \n Results: Our study findings reveal a moderate positive effect of COVID-19 on the returns of the BIST Banking Sector Index. This observation suggests that despite the challenges posed by the pandemic, the Turkish banking sector exhibited relative resilience, potentially attributable to economic support measures implemented to mitigate adverse impacts. Furthermore, our analysis indicates a lack of significant volatility spillovers, underscoring the relative stability of the Turkish banking sector during the study period. Additionally, we observed no notable leverage effect, implying that both positive and negative news had similar impacts on the Turkish banking sector during the COVID-19 crisis. \n \n Originality: This study makes a significant contribution to understanding the effects of the COVID-19 crisis on the Turkish banking sector by employing an innovative methodological approach and utilizing recent empirical data. By illuminating the specific dynamics of the Turkish financial market during this unprecedented period, our research offers valuable insights for policymakers, investors, and financial sector stakeholders, enabling them to make informed decisions in an uncertain economic environment.