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Credit transmission mechanism in Turkey: An empirical investigation

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Listed author(s):
  • Tarkan Çavusoglu

    ()

    (Department of Economics, Hacettepe University)

Abstract

The purpose of the study is to empirically test the presence of a bank lending channel in the Turkish economy. The empirical investigations are focused on the bank lending behaviour of 58 deposit money banks in the Turkish banking system over the period 1988-1999. The estimation methodology of the empirical analysis differs from that of similar studies in the literature, providing econometrically more efficient model estimates through exploiting dynamic panel data modelling with Generalized Method of Moments estimations. The results of the model estimations provide no evidence of a potential for a bank lending channel to exist in the Turkish economy. Such an outcome is reflected in the lack of a significant relationship between the change in the monetary policy indicator and the growth rate of the loan supply in the estimated models. Categorizing the loan supply responses of banks with respect to bank size differences has not provided any significant improvement in revealing the evidence of a bank lending channel. The empirical results indicate that bank lending behaviour is influenced significantly by bank specific factors, such as the balance sheet strength and the quality of the asset portfolio, and by debt sales to the banking system.

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File URL: http://www.erc.metu.edu.tr/menu/series02/0203.pdf
File Function: First version, 2002
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Paper provided by ERC - Economic Research Center, Middle East Technical University in its series ERC Working Papers with number 0203.

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Length: 31 pages
Date of creation: Mar 2002
Date of revision: Mar 2002
Handle: RePEc:met:wpaper:0203
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Phone: +90 (312) 210 2003
Fax: (312) 210 1244
Web page: http://www.erc.metu.edu.tr
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Keywords: Credit channel; bank lending channel; dynamic panel data; Turkey;

Find related papers by JEL classification:

  • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
  • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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  1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  2. Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June.
  3. Francesco Giavazzi, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks’ Balance Sheets," Working papers 99-20, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
  5. Anil K. Kashyap & Jeremy C. Stein, 1994. "Monetary Policy and Bank Lending," NBER Chapters,in: Monetary Policy, pages 221-261 National Bureau of Economic Research, Inc.
  6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  7. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
  8. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
  9. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  10. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
  11. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
  12. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
  13. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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Cited by:

  1. Varlik Serdar & Berument M. Hakan, 2016. "Credit channel and capital flows: a macroprudential policy tool? Evidence from Turkey," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 145-170, January.
  2. Petya Koeva Brooks, 2007. "Does the Bank Lending Channel of Monetary Transmission Work in Turkey?," IMF Working Papers 07/272, International Monetary Fund.

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