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The External Finance Premium and the Financial Accelerator: The Case of Turkey

Author

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  • Birgül Cambazoğlu

    () (Haliç University, Department of Banking and Insurance, 34000, Istanbul, Turkey)

  • Hacer Simay Karaalp

    () (Pamukkale University, Faculty of Economics and Administrative Sciences, 20070, Denizli, Turkey)

Abstract

The monetary transmission mechanisms have influence on saving and investment decisions of firms and households by affecting their balance sheets. This study examines the effects of monetary policy through the balance sheet channel (also known as 'financial accelerator'), which affects net worth, liquidity and spending of firms and households through external finance premium. The aim of this study is to analyze the effect of monetary contraction which raised the external finance premium and thus the effect of the increase in the external finance premium which diminishes output for Turkey over the period of 2003:01-2010:08 by using VAR (vector autoregressive models), impulse-response analysis and forecast error variance decomposition. The results indicate that contractionary monetary policy shock, which led to increased external finance premium, negatively affected the manufacturing sector and decreased total output. In other words, the monetary shock negatively affected firms' balance sheets in the short-run.

Suggested Citation

  • Birgül Cambazoğlu & Hacer Simay Karaalp, 2013. "The External Finance Premium and the Financial Accelerator: The Case of Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 6(1), pages 103-121, April.
  • Handle: RePEc:tei:journl:v:6:y:2013:i:1:p:103-121
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    References listed on IDEAS

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    Cited by:

    1. Vasiliki Makri & Konstantinos Papadatos, 2014. "How accounting information and macroeconomic environment determine credit risk? Evidence from Greece," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(1), pages 129-143, April.

    More about this item

    Keywords

    Financial Accelerator; External Finance Premium; Turkey;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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