IDEAS home Printed from https://ideas.repec.org/p/tcb/wpaper/2513.html
   My bibliography  Save this paper

Banks’ Cross-Border Borrowing and Currency Shock: Evidence from an Emerging Economy

Author

Listed:
  • Ayca Topaloglu-Bozkurt
  • Tuba Pelin Sumer
  • Suheyla Ozyildirim

Abstract

Using granular data from the Turkish banking system, we exploit a large currency depreciation in 2018 to explore whether, and how, banks’ cross-border FX borrowing evolved after the exchange rate shock. Our bank-level empirical findings show that a currency shock has a significant and negative impact on cross-border interbank FX borrowing, but the large foreign currency buffers held by banks mitigate the negative impact of the crisis on their FX borrowing. Furthermore, we find that the impact differs depending on the characteristics of the banks or the regional diversification of the lender banks. Sub-sample analysis via connectedness shows that the mitigating impact of an FX buffer is lower for strongly connected banks, while the analysis by business types indicates that the impact is higher for development banks. On the other hand, we find that the cross-border FX borrowing of resident banks decreases with the FX shock if the lender bank is located in advanced economies, but it increases if the lender banks are from emerging economies or the Middle East. Our results show the importance of diversification of funding partners to alleviate the negative impacts of an abrupt foreign currency depreciation on FX borrowing of the resident banks, i.e. to have a stable source of foreign exchange funding.

Suggested Citation

  • Ayca Topaloglu-Bozkurt & Tuba Pelin Sumer & Suheyla Ozyildirim, 2025. "Banks’ Cross-Border Borrowing and Currency Shock: Evidence from an Emerging Economy," Working Papers 2513, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:2513
    as

    Download full text from publisher

    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/d9df234a-1539-4a0d-82f0-e7d5ce529825/WP2513.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE-d9df234a-1539-4a0d-82f0-e7d5ce529825-pzGdXP5
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tcb:wpaper:2513. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sermet Pekin or Ilker Cakar or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tcmgvtr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.