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The Validity of the Bank Credit Channel in the Monetary Transmission Mechanism: VAR Analysis of Participation Banks

Year 2023, , 550 - 564, 30.06.2023
https://doi.org/10.47097/piar.1279918

Abstract

The relationship between Islamic banking and monetary policies, and the way this relationship is reflected in the real sector has attracted increasing attention, primarily because of the growing importance of Islamic banking activities. Therefore, a review of the effectiveness of the loan schemes of Islamic banks in Turkey can make a significant contribution to the literature. This study analyzes whether the loan schemes of public and private participation banks operating in Turkey’s dual banking system, are effective. To this end, the study relies on variance decomposition and impulse response function analyses of VAR models compiled from monthly data between 2009:01 and 2020:03. The industrial production index represents economic activity, the interest rate applied to consumer loans, and the total money supply (M1), representing the monetary policy instruments. The model also includes total loans and deposit variables made available for the participation banks, representing the bank loan scheme and other variables, including the nominal exchange rate and consumer price indexes. The study measures the responses of the exchange rate, inflation rate, industrial production index, participation banks’ total loans, and total deposits to one-unit shocks applied to monetary policy and interest rates. The findings from the impulse-response functions indicate that the credit channel in participation banks is partially additional since their total loans and deposits react to monetary policies in certain periods due to changes in money supply and interest rates. However, they cannot reflect this at the production level.

References

  • Akhatova, M., Zainal, M. P., & Ibrahim, M. H. (2016). Banking models and monetary transmission mechanisms in Malaysia: Are Islamic banks. Economic Papers, 35(2), 169-183.
  • Aysan, A. F., Disli, M., & Ozturk, H. (2018). Bank lending channel in a dual banking system: Why are Islamic banks so responsive? The World Economy, 41, 674-698.
  • Boivin, J., Kiley, M. T., & Mishkin, F. S. (2010). How has the monetary transmission mechanism evolved over time? NBER Working Paper No. 15879.
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427-431.
  • Dickey, D. A., & Wayne , A. F. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-1072.
  • Ergeç, E. H., & Arslan, B. G. (2013). Impact of interest rates on Islamic and conventional banks: The case of Turkey. Applied Economics, 45(17), 2381-2388.
  • Gujarati, D. N. (2011). Temel ekonometri (8 b.). İstanbul: Literatür Yayınları.
  • Hamza, H., & Saadaoui, Z. (2018). Monetary transmission through the debt financing channel of Islamic banks: Does PSIA play a role? Research in International Business and Finance, 45, 557–570.
  • IFSB. (2021). Islamic financial services industry stability report 2021. Malezya: Islamic Financial Services Board.
  • Kutlar, A. (2017). Ekonometrik zaman serileri: Teori ve uygulama 2. Baskı. Kocaeli: Umuttepe Yayınları.
  • Majid, M. S., & Hasin, Z. (2014). Islamic banks and monetary transmission mechanism in Malaysia. Journal of Economic Cooperation and Development, 35(2), 137-166.
  • Majid, M. S., & Kassim, S. H. (2015). Assessing the contribution of Islamic finance to economic growth empirical evidence from Malaysia. Journal of Islamic Accounting and Business Research, 6(2), 292-310.
  • Mert, M., & Çağlar, A. E. (2019). Eviews ve gauss uygulamalı zaman rerileri analizi. Ankara: Detay Yayıncılık.
  • Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • Rafay, A., & Farid, S. (2019). Islamic banking system: A credit channel of monetary policy – evidence from an emerging economy. Economic Research-Ekonomska Istraživanja, 32(1), 742-754.
  • Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1), 1-48.
  • Stock, J. H., & Watson, M. W. (2011). Ekonometriye giriş. (B. Saraçoğlu, Çev.) Ankara: Efil Yayınevi.
  • Sukmana, R., & Kassim, S. H. (2010). Roles of the Islamic banks in the monetary transmission process in Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 3(1), 7-19.
  • Zaheer, S., Ongena, S., & Van Wijnbergen, S. J. (2013). The transmission of monetary policy through conventional and Islamic banks. International Journal of Central Banking, 9(4), 175-224.
  • Zulkhibri, M., & Sukmana, R. (2017). Financing channels and monetary policy in a dual banking system: Evidence from Islamic banks in Indonesia. Economic Notes by Banca Monte dei Paschi di Siena SpA, 46(1), 117–143.

Parasal Aktarım Mekanizması Sürecinde Banka Kredi Kanalının Geçerliliği: Katılım Bankaları İçin VAR Analizi

Year 2023, , 550 - 564, 30.06.2023
https://doi.org/10.47097/piar.1279918

Abstract

Küresel boyutta önemli bir büyüklüğe erişen İslami bankaların para politikaları ile olan ilişkisi ve bu ilişkinin reel sektöre yansıması gündeme tutunan konular arasındadır. Bu doğrultuda İslami bankaların kredi kanalının etkinliğini Türkiye özelinde incelemek literatüre katkı sağlamak açısından önem arz etmektedir. Bu çalışmanın amacı, Türkiye'de ikili bankacılık sistemi içerisinde faaliyet yürüten kamu ve özel sermayeli katılım bankalarının kredi kanallarının etkin olup olmadığını tespit etmektedir. Bunun için 2009:01-2020:03 yılları arası aylık verilerden derlenen, VAR modellerine dayalı etki-tepki fonksiyonları ve varyans ayrıştırma analizleri yapılmıştır. Modele ekonomik aktiviteyi temsilen sanayi üretim endeksi; para politikaları için tüketici kredilerine uygulanan faiz oranı ve toplam para arzı (M1); banka kredi kanalı için katılım bankaları tarafından kullandırılan toplam kredi ve toplam mevduat değişkenleri; ayrıca nominal döviz kuru ve tüketici fiyat endeksleri olmak üzere diğer değişkenler dahil edilmiştir. Para politikası ve faiz oranlarına uygulanan bir birimlik etkiye karşı döviz kuru, enflasyon, sanayi üretim endeksi, katılım bankaları toplam krediler ve toplam mevduatların tepkisi ölçülmüştür. Etki-tepki fonksiyonlarından elde edilen bulgulara göre katılım bankalarındaki toplam kredi ve mevduatlar, para arzı ve faiz oranındaki değişiklerden kaynaklı para politikalarına karşı belirli dönemlerde tepki verseler de bunu üretim düzeyine yansıtamadıklarından katılım bankalarındaki kredi kanalının kısmen etkili olduğu tespit edilmiştir.

References

  • Akhatova, M., Zainal, M. P., & Ibrahim, M. H. (2016). Banking models and monetary transmission mechanisms in Malaysia: Are Islamic banks. Economic Papers, 35(2), 169-183.
  • Aysan, A. F., Disli, M., & Ozturk, H. (2018). Bank lending channel in a dual banking system: Why are Islamic banks so responsive? The World Economy, 41, 674-698.
  • Boivin, J., Kiley, M. T., & Mishkin, F. S. (2010). How has the monetary transmission mechanism evolved over time? NBER Working Paper No. 15879.
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427-431.
  • Dickey, D. A., & Wayne , A. F. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-1072.
  • Ergeç, E. H., & Arslan, B. G. (2013). Impact of interest rates on Islamic and conventional banks: The case of Turkey. Applied Economics, 45(17), 2381-2388.
  • Gujarati, D. N. (2011). Temel ekonometri (8 b.). İstanbul: Literatür Yayınları.
  • Hamza, H., & Saadaoui, Z. (2018). Monetary transmission through the debt financing channel of Islamic banks: Does PSIA play a role? Research in International Business and Finance, 45, 557–570.
  • IFSB. (2021). Islamic financial services industry stability report 2021. Malezya: Islamic Financial Services Board.
  • Kutlar, A. (2017). Ekonometrik zaman serileri: Teori ve uygulama 2. Baskı. Kocaeli: Umuttepe Yayınları.
  • Majid, M. S., & Hasin, Z. (2014). Islamic banks and monetary transmission mechanism in Malaysia. Journal of Economic Cooperation and Development, 35(2), 137-166.
  • Majid, M. S., & Kassim, S. H. (2015). Assessing the contribution of Islamic finance to economic growth empirical evidence from Malaysia. Journal of Islamic Accounting and Business Research, 6(2), 292-310.
  • Mert, M., & Çağlar, A. E. (2019). Eviews ve gauss uygulamalı zaman rerileri analizi. Ankara: Detay Yayıncılık.
  • Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
  • Rafay, A., & Farid, S. (2019). Islamic banking system: A credit channel of monetary policy – evidence from an emerging economy. Economic Research-Ekonomska Istraživanja, 32(1), 742-754.
  • Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1), 1-48.
  • Stock, J. H., & Watson, M. W. (2011). Ekonometriye giriş. (B. Saraçoğlu, Çev.) Ankara: Efil Yayınevi.
  • Sukmana, R., & Kassim, S. H. (2010). Roles of the Islamic banks in the monetary transmission process in Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 3(1), 7-19.
  • Zaheer, S., Ongena, S., & Van Wijnbergen, S. J. (2013). The transmission of monetary policy through conventional and Islamic banks. International Journal of Central Banking, 9(4), 175-224.
  • Zulkhibri, M., & Sukmana, R. (2017). Financing channels and monetary policy in a dual banking system: Evidence from Islamic banks in Indonesia. Economic Notes by Banca Monte dei Paschi di Siena SpA, 46(1), 117–143.
There are 20 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Research Articles
Authors

Ömer Fazıl Emek 0000-0003-4429-8892

Publication Date June 30, 2023
Published in Issue Year 2023

Cite

APA Emek, Ö. F. (2023). The Validity of the Bank Credit Channel in the Monetary Transmission Mechanism: VAR Analysis of Participation Banks. Pamukkale Üniversitesi İşletme Araştırmaları Dergisi, 10(2), 550-564. https://doi.org/10.47097/piar.1279918

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