The Roles and Effects of Macro Financial Linkages on Recessions in Turkey

Year 2024, Volume: 42 Issue: 4, 690 - 712, 25.12.2024

K. Batu Tunay , Necla Tunay

https://doi.org/10.17065/huniibf.1442427

Abstract

In this study, the effects of macro-financial linkages on recessions in Turkey are analyzed econometrically. A large data set at monthly frequency covering the period 2006-2023 was analyzed using the factor-augmented probit method developed by Bellego and Ferrara (2009, 2012). In this context, first, factors reflecting macro-financial connections were calculated with a static factor analysis. In calculating the factors, a static rather than dynamic modeling and estimation approach was adopted to minimize possible calculation difficulties. Then, recession probabilities were estimated with a set of independent variables consisting of these factors. The findings showed that statistically significant factors generally negatively affected the likelihood of recession. As a result of the estimation of alternative models according to lag lengths, it was determined that the model containing factors with six lags was more successful. However, the estimation results of level and three-lag models are also presented for comparison. The recession probabilities during the 2008 global crisis and the Covid-19 pandemic were estimated at a rate exceeding 0.95. These results showed that macro-financial linkages can predict recessions by an average of six months in advance.

Keywords

Recessions, Macro-financial Linkages, Factor-augmented Probit

Türkiye’de Makro Finansal Bağların Durgunluklar Üzerindeki Rolleri ve Etkileri

Abstract

Bu çalışmada, Türkiye’de makro finansal bağların durgunluklar üzerindeki etkileri ekonometrik olarak analiz edilmektedir. 2006-2023 dönemini kapsayan aylık frekanstaki geniş bir veri seti, Bellego ve Ferrara (2009, 2012) tarafından geliştirilen faktörlerle genişletilmiş probit yöntemi kullanılarak analiz edilmiştir. Bu bağlamda, önce statik bir faktör analizi ile makro finansal bağları yansıtan faktörler hesaplanmıştır. Faktörlerin hesaplanmasında, olası hesaplama güçlüklerini en aza indirmek için dinamik yerine statik bir modelleme ve tahmin yaklaşımı benimsenmiştir. Ardından bu faktörlerden oluşan bir bağımsız değişkenler seti ile durgunluk olasılıkları tahmin edilmiştir. Elde edilen bulgular, istatistiki olarak anlamlı bulunan faktörlerin durgunluk olasılığını genelde negatif etkilediğini göstermiştir. Gecikme uzunlukları açısından alternatif modellerin tahmini sonucunda, altı dönem gecikmeli faktörleri içeren modelin daha başarılı olduğu saptanmıştır. Bununla beraber, karşılaştırma yapmak için düzey ve üç gecikmeli modellerin tahmin sonuçları da sunulmuştur. Dış kaynaklı bir etken olarak 2008 küresel krizi ve Covid-19 pandemisi dönemlerindeki durgunluk olasılıkları, 0.95’i aşan oranda tahmin edilmiştir. Bu sonuçlar, makro-finansal bağların durgunlukları ortalama altı ay önceden haber verebileceğini göstermiştir.

Keywords

Durgunluklar, Makro Finansal Bağlar, Faktörlerle Genişletilmiş Probit

References

• Akçay, A.Ö. (2016). Küresel makro finansal şokların Türkiye ekonomisine aktarım kanalı: Global VAR yaklaşımı. Akademik ve Sosyal Araştırmalar Dergisi, 4(26), 388-415. https://doi.org/10.16992/ASOS.1157
• Bai, J., & Ng, S., (2002). Determining the number of factors in approximate factor models. Econometrica 70(1), 191–221. https://doi.org/10.1111/1468-0262.00273
• Banerjee, S., Anand, J. K., & Bhide, S. (2021). Estimation of macro-financial linkages for the Indian economy. Journal of Emerging Market Finance, 20(1), 7-47. http://dx.doi.org/10.1177/0972652720927856
• Bayoumi, T., & Melander, O. (2008). Credit matters: Empirical evidence on U.S. macro-financial linkages. IMF Working Paper, No. WP/08/169, July.
• Bellego, C., & Ferrara, L. (2009). Forecasting euro area recessions using time-varying binary response models for financial variables. Working Paper, Banque de France, No. 259.
• Bellego, C., & Ferrara, L. (2012). Macro-financial linkages and business cycles: A factor-augmented probit approach. Economic Modelling, 29(5), 1793-1797. https://doi.org/10.1016/j.econmod.2012.05.033
• Bernanke, B. S., Boivin, J., & Eliasz, P. (2005). Measuring the effects of monetary policy: A factor augmented vector autoregressive (FAVAR) approach. The Quarterly Journal of Economics, 120(1), 387-422. https:/doi.org/10.1162/0033553053327452
• Bluwstein, K. (2017). Macro-financial linkages and the role of unconventional monetary and macroprudential policy. Unpublished doctoral dissertation, European University Institute, Department of Economics, Florence.
• Borio, C., Drehmann, M., ve Xia, D. (2018). The financial cycle and recession risk. BIS Quarterly Review, December, 16, 1-13. https://www.bis.org/publ/qtrpdf/r_qt1812g.htm
• Caporale, G. M., Karanasos, M., & Yfanti, S. (2022). Macro-financial linkages in the high-frequency domain: Economic fundamentals and the Covid-induced uncertainty channel in US and UK financial markets. International Journal of Finance & Economics, 1-28. http://dx.doi.org/10.1002/ijfe.2748
• Cerra, V., & Saxena, S. C. (2010). Growth dynamics: The myth of economic recovery. C. Crowe, S. Johnson, J. D. Ostry, J. Zettelmeyer, (Ed.) Macrofinancial lincages. Trends, crises, and policies (pp. 59-84). International Monetary Fund, Washington D.C.
• Chen, Z., Iqbal, A., & Lai, H., (2011). Forecasting the probability of US recessions: A Probit and dynamic factor modelling approach. Canadian Journal of Economics, 44(2), 652–671. https://www.jstor.org/stable/41336378
• Claessens, S., & Kose, M. A. (2018). Frontiers of macrofinancial linkages. BIS Papers, No: 95, January.
• Claessens, S., Kose, M. A., & Terrones, M. E. (2008). Financial stress and economic activity, BDDK Bankacılık ve Finansal Piyasalar, 2(2), 11-23.
• Claessens, S., Kose, M. A., & Terrones, M. E. (2011). Financial cycles: What? How? When? National Bureau of Economic Research (NBER), International Seminar on Macroeconomics, 7(1), 303–344.
• Claessens, S., Kose, M. A., & Terrones, M. E. (2012). How do business and financial cycles interact? Journal of International Economics, 87(1), 178–190. https://doi.org/10.1016/j.jinteco.2011.11.008
• De Haas, R., Ferreira, D., & Taci, A. (2010). What determines the composition of banks’ loan portfolios? Evidence from transition countries. Journal of Banking and Finance, 34, 388-398. https://doi.org/10.1016/j.jbankfin.2009.08.005
• Doz, C., Giannone, D., & Reichlin, L., (2011). A two-step estimator for large approximate dynamic factor models based on Kalman filtering. Journal of Econometrics, 164(1), 188–205. https://doi.org/10.1016/j.jeconom.2011.02.012 Estrella, A., Rodrigues, A.P., & Schich, S., (2003). How stable is the predictive power of the yield curve? Evidence from Germany and the United States. The Review of Economics and Statistics, 85(3), 629–644. https://www.jstor.org/stable/3211702
• Filip, B.F., (2015). The quality of bank loans within the framework of globalization. Procedia – Economics and Finance, 20, 208-217. https://doi.org/10.1016/S2212-5671(15)00067-2
• Grigoli, F., Mansilla, M., & Saldias, M. (2018). Macro-financial linkages and heterogeneous non-performing loans projections: An application to Ecuador. Journal of Banking and Finance, 97(C), 130-141. https://doi.org/10.1016/j.jbankfin.2018.09.023
• Ibrahim, M. H. (2019). Oil and macro-financial linkages: Evidence from the GCC countries. The Quarterly Review of Economics and Finance, 72(1), 1-13. https://doi.org/10.1016/j.qref.2019.01.014
• Le, C.H.A. (2016). Macro-financial linkages and bank behaviour: Evidence from the second-round effects of the global financial crisis on East Asia. Eurasian Economic Review, 6(3), 365-387. https://doi.org/10.1007/s40822-016-0048-7
• Leroy, A., & Pop, A. (2019). Macro-financial linkages: The role of the institutional framework. Journal of International Money and Finance, 92(1), 75-97. https://doi.org/10.1016/j.jimonfin.2018.12.002
• Love, I., & Ariss, R. T. (2013). Macro-financial linkages in Egypt: A panel analysis of economic shocks and loan portfolio quality. IMF Working Paper, No: WP/12/271.
• Love, I., & Ariss, R. T. (2014). Macro-financial linkages in Egypt: A panel analysis of economic shocks and loan portfolio quality. Journal of International Financial Markets, Institutions and Money, 28, 158-181. https://doi.org/10.1016/j.intfin.2013.10.006
• Miyajima, K. (2017). An empirical investigation of oil-macro-financial linkages in Saudi Arabia. Review of Middle East Economics and Finance, 13(2), 1-15. https://doi.org10.1515/rmeef-2017-0018
• Muellbauer, J. (2020). Implications of household-level evidence for policy models: The case of macrofinancial linkages. Oxford Review of Economic Policy, 36(3), 510-555. https://doi.org/10.1093/oxrep/graa038
• Olafsson, T.T. (2016). Macrofinancial linkages and crises in small open economies. Unpublished doctoral dissertation, Aarhus University School of Business and Social Sciences, Department of Economics and Business Economics, Denmark. https://pure.au.dk/portal/files/103970053/PhD_dissertation_Thorvardur_Tj_rvi_lafsson.pdf
• Papadopoulos, G., Chionis, D., & Rachaniotis, N. P. (2018). Macro-financial linkages during tranquil and crisis periods: evidence from stressed economies. Risk Management, 20, 142-166. https://doi.org/10.1057/s41283-017-0032-x
• Pesola, J. (2001). The role of macroeconomic shocks in banking crises. Bank of Finland Discussion Paper No. 6/2001, April.
• Prieto, E., Eickmeier, S., & Marcellino, M. (2016). Time variation in macro-financial linkages. Journal of Applied Econometrics, 31, 1215-1233. https://doi.org/10.1002/jae.2499
• Punzi, M. T. (2020). The impact of uncertainty on the macro-financial linkage with international financial exposure. Journal of Economics and Business, 110, 105894. https://doi.org/10.1016/j.jeconbus.2020.105894
• Stock, J., & Watson, M., 2002. Macroeconomic forecasting using diffusion indexes. Journal of Business and Economic Statistics, 20, 147–162. https://doi.org/10.1198/073500102317351921
• Şengönül, A., Karadaş, H. A., & Koşaroğlu, Ş. M. (2018). Makroekonomik değişkenler ve finansal değişkenlerin uzun dönem ilişkisi: SVAR analizi. BDDK Bankacılık ve Finansal Piyasalar Dergisi, 12(1), 63-85.
• Tunay, K. B. ve Tunay, N. (2019). Makro finansal şoklar ve banka krizlerinin etkileşimi: Türkiye örneği. Avrasya İşletme ve İktisat Dergisi, 20, 143-158. http://dx.doi.org/10.17740/eas.econ.2019.V20-10
• Tunay, K.B. (2016a). Kredi portföy kalitesinin belirleyicileri ve makro finansal bağların rolü. Finans, Politik ve Ekonomik Yorumlar, 53(616), 49-60.
• Tunay, K.B. (2016b). Makro finansal bağlar ve kredi portföyü kalitesine etkileri. Yönetim ve Ekonomi Araştırmaları Dergisi, 14(4), 25-44.