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The Asymmetric Effect of Foreign Ownership and Concentration on Financial Dollarization: The Case of the Turkish Economy

Author

Listed:
  • Jin Zhao

    (Shanghai Lixin University of Accounting and Finance)

  • Emine Kaya

    (Malatya Turgut Özal University)

  • Kishwar Ali

    (European University of Lefke)

  • Cosimo Magazzino

    (Roma Tre University
    Western Caspian University)

  • Abdulkadir Barut

    (Harran University
    Middle East University
    Recep Tayyip Erdoğan University)

Abstract

The Turkish economy is fragile and exhibits high exchange rate volatility, and financial dollarization is chronic in this country. Thus, this study explores the asymmetric effect of foreign ownership and concentration on financial dollarization in Turkey. The study covers 2004: Q1–2020: Q2 quarterly period and determines the asymmetric relationship between foreign ownership and concentration on financial dollarization. The nonlinear autoregressive distributed lags (NARDL) model is used as a main model and the autoregressive distributed lags (ARDL) model, the Bayesian vector autoregression (BVAR) model, and the standard vector autoregression (VAR) model are employed for robustness checks. The NARDL model shows that concentration, exchange rate, foreign ownership, inflation, and GDP growth rates are effective factors in influencing deposit dollarization. The study confirms that positive (negative) shocks in concentration have a significant and positive (negative) effect on deposit dollarization in the short run. Also, the standard VAR model performs better than the BVAR model and the ARDL model and standard VAR model give approximately similar results to the NARDL model. These findings imply that speculative trading can be considered the cause of deposit dollarization and credit dollarization for Turkey, and domestic citizens do not dollarize the deposits to protect their wealth. Credit dollarization increases even if both positive and negative shocks happen to foreign ownership and concentration since credit dollarization may be seen as a hedging mechanism for the banking system in a high-inflation environment.

Suggested Citation

  • Jin Zhao & Emine Kaya & Kishwar Ali & Cosimo Magazzino & Abdulkadir Barut, 2025. "The Asymmetric Effect of Foreign Ownership and Concentration on Financial Dollarization: The Case of the Turkish Economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(3), pages 12504-12540, September.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:3:d:10.1007_s13132-024-02326-9
    DOI: 10.1007/s13132-024-02326-9
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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