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Interactions between bank behavior and financial structure: evidence from a developing country

Author

Listed:
  • Bakis, Ozan

    () (Galatasaray University Economic Research Center)

  • Karanfil, Fatih

    () (Galatasaray University Economic Research Center)

  • Polat, Sezgin

    () (Galatasaray University Economic Research Center)

Abstract

We use time-series analysis to examine bank behavior with respect to credit supply employing both banking data and other financial variables for the Turkish economy over the 1990 – 2009 period. We provide a vector error-correction (VEC) model to test for multivariate cointegration and Granger causality. More specifically, this paper seeks to fill the gap on how the bank behavior interacts with the financial structure given the conditions of macroeconomic policy. Our findings suggest that Granger causality is present between credit-deposit ratio and maturity of time deposits which implies that depositor decision on maturity changes the composition of balance sheet of banks leading to low credit creation. This result implies that macroeconomic uncertainty and instability lead to a kind of credit contraction with the decrease of deposit maturity. Our results also reveal that economic cycles are credit-driven in Turkey.

Suggested Citation

  • Bakis, Ozan & Karanfil, Fatih & Polat, Sezgin, 2012. "Interactions between bank behavior and financial structure: evidence from a developing country," GIAM Working Papers 12-1, Galatasaray University Economic Research Center.
  • Handle: RePEc:ris:giamwp:2012_001
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Credit-deposit ratio; deposit maturity; Granger causality;

    JEL classification:

    • 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
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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