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The Factors Affecting Credit Bubbles: The Case Of Turkey

Author

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  • KORKMAZ, Özge

    (Bayburt University, F.E.A.S, Department of Economics)

  • ERER, Elif

    (Ege University ,Department of Economics)

  • ERER, Deniz

    (Ege University ,Department of Economics)

Abstract

The Global financial crisis that started in the United Stated and which affected the whole World and especially Europe in a short time shows once again that financial crises occur as a result of bubbles in asset prices or a strong credit growth. Moreover, that bubbles in financial markets are defined as increases in asset prices. Central banks tend to control excess credit expansion and thus ensure stability in financial markets. The purpose of this study is to analyze the existence of a bubble in the Turkish credit market and the success of the monetary policy by the Central Bank of Turkey to prevent these bubbles in light of ongoing interest debates in Turkey. Monthly real estate loans have been considered for the 1986:01 to 2014:04 period in the credit sector. In this study, Sup Augmented Dickey Fuller and Generalized Sup Augmented Dickey Fuller tests have been used to identify and define bubbles. Thereafter, the factors affecting credit bubbles have been investigated via logit model. From the results of the study, it can be inferred that both the consumer price index and interest rates have negative effects on credit bubbles, while total credit to the nonfinancial private sector and current account balances have positive effects on credit bubbles.

Suggested Citation

  • KORKMAZ, Özge & ERER, Elif & ERER, Deniz, 2016. "The Factors Affecting Credit Bubbles: The Case Of Turkey," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 20(1), pages 37-53.
  • Handle: RePEc:vls:finstu:v:20:y:2016:i:1:p:37-53
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, February.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Florina-Cristina Badarau & Alexandra Popescu, 2012. "Monetary Policy and Credit Cycles: A DSGE Analysis," Working Papers halshs-00828074, HAL.
    4. Fredric Mishkin, 2011. "How Should Central Banks Respond to Asset-Price Bubbles? The 'Lean' versus 'Clean' Debate After the GFC," RBA Bulletin, Reserve Bank of Australia, pages 59-70, June.
    5. Anil K. Kashyap & Jeremy C. Stein, 2012. "The Optimal Conduct of Monetary Policy with Interest on Reserves," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 266-282, January.
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    More about this item

    Keywords

    Bubbles; Sup Test; Explosive Root; Logit Model;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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