Bank Lending in Turkey: Effects of Monetary and Fiscal Policies

33 Pages Posted: 1 Feb 2011

See all articles by Burcu Aydin

Burcu Aydin

International Monetary Fund

Deniz Igan

International Monetary Fund (IMF) - Financial Studies Division

Date Written: February 2011

Abstract

The period following the 2000-01 crisis was marked by a successful disinflation program sustained through inflation targeting and fiscal discipline in Turkey. This paper studies the impact of monetary and fiscal policies on credit growth during this period. Using quarterly bank-level data covering 2002-08, we find evidence that liquidity-constrained banks have sharper decline in lending during contractionary monetary policies and that crowding-out effect disappears more for banks with a retail-banking focus when fiscal policies are prudent. The results are statistically weak, suggesting that bank lending channel is not strong in Turkey and government finances has limited direct impact on credit.

Keywords: Bank credit, Banking crisis, Banking sector, Credit expansion, Fiscal policy, Loans, Monetary policy, Monetary transmission mechanism, Turkey

Suggested Citation

Aydin, Burcu and Igan, Deniz, Bank Lending in Turkey: Effects of Monetary and Fiscal Policies (February 2011). IMF Working Paper No. 10/233, Available at SSRN: https://ssrn.com/abstract=1750722

Burcu Aydin

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Deniz Igan (Contact Author)

International Monetary Fund (IMF) - Financial Studies Division ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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