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DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE

Year 2011, Volume: 3 Issue: 2, 35 - 45, 01.12.2011

Abstract

The economists have focused on credit crunch since 1990’s. The economists are
not in consensus as to what constitutes the credit crunch. The differences in
definitions come from the causes of credit contraction. Credit crunch is generally
accepted as an enormous decline period in credit supply. Although the credit
crunch is seen as a supply phenomenon, some economists define it as a demand
issue. Investment declines significantly as result of an increase in credit rationing.
The purpose of this study is to investigate the dependence of private investment
on money and credit supply in Turkey. In other words, we want to quantify the
effect of credit contraction in the banking sector on private fixed investment.
VAR model is used to identify the existence of credit crunch through four
economic variables: Private fixed investment, money stock (M2), bank loans to
private sector and interest rate of commercial loans for the period ranging from
2003:01 to 2010:08. According to results of this study, it can be said that the
credit crunch that we dealt with as a supply phenomenon leads to an investment
collapse (slump) in Turkey.
The paper proceeds as follows: Section I provides theoretical background of credit
channels and credit crunch. Section II summarizes recent empirical studies.
Section III describes variables and discusses the empirical findings of the model.
Section IV provides concluding remarks.

References

  • Bernanke, Ben S., Cara S. Lown and Benjamin M. Friedman (1991), “The Credit
  • Crunch”, Brookings Papers on Economic Activity, Vol. 1991, No. 2, pp. 205-247.
  • Bernanke, B. S., M. Gertler and S. Gilchrist (1996), “The Financial Accelerator and the Flight to Quality”, The Review of Economics and Statistics, Vol. 78, No. , pp. 1-15.
  • BDDK (2007) Bankacılıkta Yapısal Gelişmeler, Bankacılık Düzenleme ve Denetleme Kurumu Yayını: Ankara.
  • Bijapur, Mohan (2010), “Does monetary policy lose effectiveness during a credit crunch?”, Economics Letters, Vol. 106, Iss. 1, pp. 42-44.
  • Borensztein, Eduardo and Jong-Wha Lee (2002),“Financial Crisis and Credit
  • Crunch in Korea: Evidence from Firm- Level Data”, Journal of Monetary Economics, Vol. 39, Iss. 4, pp. 853-875. Clair, Robert T. and Paula Tucker (1993), “Six Causes of the Credit Crunch”,
  • Federal Bank of Dallas Economic Review, Third Quarter, pp. 1- 19. Ding, W., Ilker Domaç and Giovanni Ferri (1998), “Is There a Credit Crunch in
  • East Asia”, World Bank Policy Research Working Paper No. 1959, Washington D.C.: World Bank.
  • Ferri, Giovanni, Tae Soo Kang (1999), “The Credit Channel At Work: Lessons
  • From The Republic Of Korea's Financial Crisis”, World Bank Working Paper No. , Washington D.C.: World Bank. Ghosh, Swati R and Atish R. Ghosh (1999), “East Asia in the Aftermath: Was
  • There a Crunch?”, IMF Working Paper WP/99/38, Washington D.C.: International Monetary Fund. Hubbard, Glenn. R (1994), “Is There a Credit Channel for Monetary Policy?”,
  • NBER Working Paper, pp. 1-45. Kim, E. Hyun (1999), “A Credit Channel As The Key Transmission Mechanism
  • Underlying The Recent Financial Crisis In Korea”, World Bank Policy Research Paper Working Paper No. 2103, Washington D.C.: World Bank.
  • Kliesen, Kevin L. & John Tatom (1992), “The Recent Credit Crunch: The Neglected Dimensions”, Federal Reserve Bank of St. Louis Review, No. 92/09, pp. 18-36.
  • Lamberte, Mario B. (1999), “A Second Look at Credit Crunch”, Philippine
  • Institute for Development Studies, Discussion Paper Series No. 99-23, pp. 1-23. Saarenheimo, Thomas (1995), “Credit Crunch Caused Investment Slump?”, Bank of Finland Discussion Papers, 6/95, pp. 1-27.
  • Yuan, Mingwei and Christian Zimmermann (1999), “Credit Crunch, Bank
  • Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects”, Bank of Canada, pp. 323-349.
Year 2011, Volume: 3 Issue: 2, 35 - 45, 01.12.2011

Abstract

References

  • Bernanke, Ben S., Cara S. Lown and Benjamin M. Friedman (1991), “The Credit
  • Crunch”, Brookings Papers on Economic Activity, Vol. 1991, No. 2, pp. 205-247.
  • Bernanke, B. S., M. Gertler and S. Gilchrist (1996), “The Financial Accelerator and the Flight to Quality”, The Review of Economics and Statistics, Vol. 78, No. , pp. 1-15.
  • BDDK (2007) Bankacılıkta Yapısal Gelişmeler, Bankacılık Düzenleme ve Denetleme Kurumu Yayını: Ankara.
  • Bijapur, Mohan (2010), “Does monetary policy lose effectiveness during a credit crunch?”, Economics Letters, Vol. 106, Iss. 1, pp. 42-44.
  • Borensztein, Eduardo and Jong-Wha Lee (2002),“Financial Crisis and Credit
  • Crunch in Korea: Evidence from Firm- Level Data”, Journal of Monetary Economics, Vol. 39, Iss. 4, pp. 853-875. Clair, Robert T. and Paula Tucker (1993), “Six Causes of the Credit Crunch”,
  • Federal Bank of Dallas Economic Review, Third Quarter, pp. 1- 19. Ding, W., Ilker Domaç and Giovanni Ferri (1998), “Is There a Credit Crunch in
  • East Asia”, World Bank Policy Research Working Paper No. 1959, Washington D.C.: World Bank.
  • Ferri, Giovanni, Tae Soo Kang (1999), “The Credit Channel At Work: Lessons
  • From The Republic Of Korea's Financial Crisis”, World Bank Working Paper No. , Washington D.C.: World Bank. Ghosh, Swati R and Atish R. Ghosh (1999), “East Asia in the Aftermath: Was
  • There a Crunch?”, IMF Working Paper WP/99/38, Washington D.C.: International Monetary Fund. Hubbard, Glenn. R (1994), “Is There a Credit Channel for Monetary Policy?”,
  • NBER Working Paper, pp. 1-45. Kim, E. Hyun (1999), “A Credit Channel As The Key Transmission Mechanism
  • Underlying The Recent Financial Crisis In Korea”, World Bank Policy Research Paper Working Paper No. 2103, Washington D.C.: World Bank.
  • Kliesen, Kevin L. & John Tatom (1992), “The Recent Credit Crunch: The Neglected Dimensions”, Federal Reserve Bank of St. Louis Review, No. 92/09, pp. 18-36.
  • Lamberte, Mario B. (1999), “A Second Look at Credit Crunch”, Philippine
  • Institute for Development Studies, Discussion Paper Series No. 99-23, pp. 1-23. Saarenheimo, Thomas (1995), “Credit Crunch Caused Investment Slump?”, Bank of Finland Discussion Papers, 6/95, pp. 1-27.
  • Yuan, Mingwei and Christian Zimmermann (1999), “Credit Crunch, Bank
  • Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects”, Bank of Canada, pp. 323-349.
There are 19 citations in total.

Details

Other ID JA56NA28DZ
Journal Section Articles
Authors

Birgül Cambazoğlu This is me

Sevcan Güneş This is me

Publication Date December 1, 2011
Published in Issue Year 2011 Volume: 3 Issue: 2

Cite

APA Cambazoğlu, B., & Güneş, S. (2011). DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE. International Journal of Economics and Finance Studies, 3(2), 35-45.
AMA Cambazoğlu B, Güneş S. DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE. IJEFS. December 2011;3(2):35-45.
Chicago Cambazoğlu, Birgül, and Sevcan Güneş. “DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE”. International Journal of Economics and Finance Studies 3, no. 2 (December 2011): 35-45.
EndNote Cambazoğlu B, Güneş S (December 1, 2011) DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE. International Journal of Economics and Finance Studies 3 2 35–45.
IEEE B. Cambazoğlu and S. Güneş, “DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE”, IJEFS, vol. 3, no. 2, pp. 35–45, 2011.
ISNAD Cambazoğlu, Birgül - Güneş, Sevcan. “DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE”. International Journal of Economics and Finance Studies 3/2 (December 2011), 35-45.
JAMA Cambazoğlu B, Güneş S. DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE. IJEFS. 2011;3:35–45.
MLA Cambazoğlu, Birgül and Sevcan Güneş. “DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE”. International Journal of Economics and Finance Studies, vol. 3, no. 2, 2011, pp. 35-45.
Vancouver Cambazoğlu B, Güneş S. DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE. IJEFS. 2011;3(2):35-4.