@article{article_460673, title={Assessment of Bad Loans in Turkey: What Role do Financial Conditions have?}, journal={Finansal Araştırmalar ve Çalışmalar Dergisi}, volume={10}, pages={137–152}, year={2018}, DOI={10.14784/marufacd.460673}, author={Us, Vuslat}, keywords={Non-performing loans,Turkish banking sector,Global crisis,Financial conditions index,Financial stability}, abstract={This paper analyzes non-performing loans in the Turkish banking sector with a special focus on the role <br>of financial conditions after the global crisis. In doing so, the empirical framework shows that the determinants <br>of non-performing loans have changed after the crisis. In particular, non-performing loans are mostly <br>shaped by bank-specific factors before the crisis, whereas these variables have a reduced effect after the <br>global crisis. This finding is attributed to global developments in this period, which certainly had effects on <br>both global and domestic financial conditions. The inclusion of financial conditions index as an additional <br>regressor in the post-crisis episode also confirms this finding by yielding a statistically significant coefficient <br>while the sign of the coefficient implies that tighter financial conditions cause higher non-performing loans. <br>This supports our view that financial conditions take account for the dynamics of bad loans after the crisis. <br>In the upcoming period, the course of global policy normalization may affect and even tighten financial <br>conditions, thereby causing non-performing loans to gain momentum. All these analysis results signal challenges <br>and prospects regarding the maintenance of financial stability and the conduct of monetary policy. <br>}, number={18}, publisher={Marmara University}