Year 2019, Volume 2 , Issue 38, Pages 279 - 292 2019-12-31

IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY

Sule GUNDUZ [1] , Burçak Müge TUNAER VURAL [2]


Monetary policy regaining popularity post 2008 period, massively increased the balance sheets of Turkish Central Bank balance sheet al well by 348 per cent from 2010 until 2019. Disconnect between Turkish macroeconomic growth and the monetary base, however, increases the question on effectiveness of monetary policy implemented by the Turkish Central Bank. Main purpose of this research is to investigate the effectiveness of monetary policy. To this end, we implement an empirical analysis of the relationship between monetary policy, bank loans and economic activity.  Findings reveal that the monetary transmission mechanism through bank lending channel is not effective in Turkey. Monetary policy shifts change loan supply. Yet, the production remains unresponsive to the changes in interest rates, rendering monetary policy ineffective. Despite increasing loan supply, gross domestic product does not increase significantly. By the same token, contractionary monetary policy shifts do not hold the inflation down.

Monetary transmission mechanism, Bank-lending channel, Impulse Response
  • Aklan, N. A. and M. Nargeleçekenler (2008). ‘‘Para Politikasının Banka Kredi Kanalı Üzerindeki Etkileri’’. İ.Ü. Siyasal Bilgiler Fakültesi Dergisi, 39: 109 – 132.
  • Bernanke, B. S. and A. Blinder (1988). ‘‘Credit, Money, and Aggregate Demand’’. American Economic Review, 78(2): 435 – 439.
  • Bernanke, B. S. and A. Blinder (1992). ‘‘The Federal Funds Rate and the Channels of Monetary Transmission’’. American Economic Review, 82(4): 901 – 921.
  • Bernanke, B. S. and M. Gertler (1995). ‘‘Inside the Black Box: The Credit Channel of Monetary Policy Transmission’’. The Journal of Economic Perspectives, 9(4): 27 – 48.
  • Bernanke, B. S. and V. R. Reinhart (2004). ‘‘Conducting Monetary Policy at Very Low Short Term Interest Rates’’. American Economic Review, Papers and Proceedings, 94(2): 85 – 90.
  • Brooks, P.K. (2007). ‘‘Does the Bank Lending Channel of Monetary Transmission Work in Turkey?’’. IMF Working Paper 07/272 (https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Does-the-Bank-Lending-Channel-of-Monetary-Transmission-Work-in-Turkey-21488 / 19.07.2019) .
  • Çağlarırmak-Uslu, N. and P. Karahan (2016). ‘‘An Analysis on the Efficiency of Bank Lending Channel in Turkey’’. Journal of Business, Economics and Finance, 5(2): 206-217.
  • Christiano, L. J., M. Eichenbaum, and C. L. Evans (1999). ‘‘Monetary Policy Shocks: What Have We Learned and to What End?’’. Handbook of Macroeconomics, 1(A): 65 – 148.
  • Ciccarelli, M., J-L. Peydro and A. Maddaloni (2015). ‘‘Trusting the Bankers: A New Look At the Credit Channel of Monetary Policy’’. ECB Working Paper, No. 1228, ECB. Frankfurt, a. M.
  • Çatık, A. N. and M. Karaçuka (2012). ‘‘The Bank Lending Channel in Turkey: Has It Changed After the Low-inflation Regime?’’. Applied Economics Letters, 19(13): 1237- 1242.
  • Çavuşoğlu, T. (2002). ‘‘Credit Transmission Mechanism in Turkey: An Empirical Investigation’’.METU Research Centre ERC, Working Papers in Economics, 02(3): 1 – 30.
  • Çiçek, M. (2005). ‘‘Türkiye’de Parasal Aktarım Mekanizması: Var (vektör otoregrasyonu) Yaklaşımıyla Bir Analiz’’. İktisat İşletme ve Finans, 20(233): 82-105.
  • Eggertsson, G. B. and P. Krugman (2012). ‘‘Debt, Deleveraging, and the Liquidity Trap: A Fisher –Minsky – Koo Approach’’. Quarterly Journal of Economics, 127(3): 1469 – 1513.
  • Erdogan, S. and S. G. Besballi (2009). ‘‘Türkiye’de Banka Kredileri Kanalının İşleyişi Üzerine Ampirik Bir Analiz’’. Doğus Dergisi, 11(1): 28-41.
  • Gertler, M. and N. Kiyotaki (2015). ‘‘Banking, Liquidity, and Bank Runs in an Infinite Horizon Economy’’. American Economic Review, 105(7): 2011 – 2043.
  • Golodniuk, I. (2006). ‘‘Evidence on the Bank Lending channel in Ukraine’’. Research in International Business and Finance, 20 (2): 180-199.
  • Gourinchas, P-O. and M. Obstfelt (2012). ‘‘Stories of the Twentieth Century for the Twenty-first’’. American Economic Journal: Macroeconomics, 4(1): 226 – 265.
  • Hofmann, B. and B. Bogdanova (2012). ‘‘Taylor Rules and Monetary Policy: A Global ‘‘Great Deviation’’?’’. BIS Quarterly Review, September: 37 – 49.
  • Kara, A. H. (2012). ‘‘Monetary Policy in Turkey after the Global Crisis’’. CBRT Working Paper 12(17).
  • Kashyap, A. K. and J. C. Stein, D. W. Wilcox (1993). ‘‘Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance’’. American Economic Review, 83(1): 78 – 98.
  • Kashyap, A. K. and J. C. Stein (1994). Monetary Policy and Bank Lending, in Monetary Policy. Edited by N. Gregory Mankiw, University of Chicago Press, Chicago. (https://www.nber.org/chapters/c8334.pdf / 26.08.2019).
  • Mishkin, F. S. (1995). ‘‘Symposium on the Monetary Transmission Mechanism’’. Journal of Economic Perspectives, 9(4): 3-10.
  • Mishkin, F. S. (1996). ‘‘The Channels of Monetary Transmission: Lessons for Monetary Policy’’. NBER Working Paper Series 5464, National Bureau of Economic Research, Inc. (https://www.nber.org/papers/w5464 /21.09.19)
  • Oliner, S.D. and G. D. Rudenbusch (1995). ‘‘Is there a bank lending channel for monetary policy?’’. Economic Review, Federal Reserve Bank of San Francisco (2): 1-22.
  • Özsuca, E. A. and E. Akbostanci (2012). ‘‘An Empirical Analysis of the Bank Lending Channel in Turkey’’. ERC Working Papers in Economics, 12/05, August 2012 (http://www.erc.metu.edu.tr/menu/series12/1205.pdf / 18.08.19).
  • Perron, P. (1989). ‘‘The Great Crush, The Oil Price Shock and the Unit Root Hypothesis’’. Econometrica, 55: 277 – 302.
  • Schularick, M. and A. M. Taylor (2012). ‘‘Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870 – 2008’’. American Economic Review, 102(2), 1029 – 1061.
  • Sims, C. (1980). ‘‘Macroeconomics and Reality’’. Econometrica, 48: 1 – 48.
  • Sims, C. (1992). ‘‘Interpreting the Macroeconomic Time Series Facts: The Effect of Monetary Policy’’. European Economic Review, 36: 975 – 1000.
  • Taylor, J. B. (1995). ‘‘The Monetary Transmission Mechanism: An Empirical Framework’’. Journal of Economic Perspectives, 9(4): 11 – 26.
  • Taylor, A. M. (2010). ‘‘Macroeconomic Lessons from the Great Deviation’’, in Acemoğlu, D., and Woodford, M. (eds), NBER Macroeconomic Annual, 25: 387 – 395.
  • Taylor, A. M. (2015). ‘‘Credit, Financial Stability, and the Macroeconomy’’. Annual Review of Economics, 7: 309 – 339.
  • Turguttopbas, N. (2019). ‘‘The Bank Lending Channel of Monetary Transmission in Turkey’’. Business and Economics Research Journal, 10(2): 313-326.
  • Zivot, E. and D. W. K. Andrews (1992). ‘‘Further Evidence on the Great Crush, the Oil Price Shock and the Unit Root Hypothesis’’. Journal of Business and Economic Statistics, 10: 251 – 270.
Primary Language en
Subjects Economics
Journal Section Articles
Authors

Orcid: 0000-0001-5484-5795
Author: Sule GUNDUZ (Primary Author)
Institution: DOKUZ EYLUL UNIVERSITY
Country: Turkey


Orcid: 0000-0002-4252-6276
Author: Burçak Müge TUNAER VURAL
Institution: DOKUZ EYLUL UNIVERSITY
Country: Turkey


Dates

Publication Date : December 31, 2019

Bibtex @research article { kosbed645777, journal = {Kocaeli Üniversitesi Sosyal Bilimler Dergisi}, issn = {1302-6658}, address = {kosbed@kocaeli.edu.tr}, publisher = {Kocaeli University}, year = {2019}, volume = {2}, pages = {279 - 292}, doi = {10.35343/kosbed.645777}, title = {IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY}, key = {cite}, author = {Gunduz, Sule and Tunaer Vural, Burçak Müge} }
APA Gunduz, S , Tunaer Vural, B . (2019). IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY . Kocaeli Üniversitesi Sosyal Bilimler Dergisi , 2 (38) , 279-292 . DOI: 10.35343/kosbed.645777
MLA Gunduz, S , Tunaer Vural, B . "IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY" . Kocaeli Üniversitesi Sosyal Bilimler Dergisi 2 (2019 ): 279-292 <https://dergipark.org.tr/en/pub/kosbed/issue/51799/645777>
Chicago Gunduz, S , Tunaer Vural, B . "IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY". Kocaeli Üniversitesi Sosyal Bilimler Dergisi 2 (2019 ): 279-292
RIS TY - JOUR T1 - IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY AU - Sule Gunduz , Burçak Müge Tunaer Vural Y1 - 2019 PY - 2019 N1 - doi: 10.35343/kosbed.645777 DO - 10.35343/kosbed.645777 T2 - Kocaeli Üniversitesi Sosyal Bilimler Dergisi JF - Journal JO - JOR SP - 279 EP - 292 VL - 2 IS - 38 SN - 1302-6658- M3 - doi: 10.35343/kosbed.645777 UR - https://doi.org/10.35343/kosbed.645777 Y2 - 2019 ER -
EndNote %0 Kocaeli Üniversitesi Sosyal Bilimler Dergisi IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY %A Sule Gunduz , Burçak Müge Tunaer Vural %T IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY %D 2019 %J Kocaeli Üniversitesi Sosyal Bilimler Dergisi %P 1302-6658- %V 2 %N 38 %R doi: 10.35343/kosbed.645777 %U 10.35343/kosbed.645777
ISNAD Gunduz, Sule , Tunaer Vural, Burçak Müge . "IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY". Kocaeli Üniversitesi Sosyal Bilimler Dergisi 2 / 38 (December 2020): 279-292 . https://doi.org/10.35343/kosbed.645777
AMA Gunduz S , Tunaer Vural B . IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY. Kocaeli Üniversitesi Sosyal Bilimler Dergisi. 2019; 2(38): 279-292.
Vancouver Gunduz S , Tunaer Vural B . IMPACT OF CREDIT EXPANSION ON ECONOMIC ACTIVITY IN TURKISH ECONOMY. Kocaeli Üniversitesi Sosyal Bilimler Dergisi. 2019; 2(38): 279-292.