The Bank Lending Channel of Monetary Transmission in Turkey

Abstract

In this paper, it is aimed to fill a gap in the literature by providing empirical evidence on the influence of monetary policy of Central Bank of Turkey on bank lending in Turkish financial system. In the analysis, the bank level data consisting of 20 banks and monthly market interest rates are used for the period 2001-2017. The findings of the study address three different perspectives of transmission of monetary policy rates. Firstly, the effect of the policy rate on bank lending rates is evaluated and it is confirmed that a change in the policy rate has been reflected in banks' lending rate with 3 months lag. The second group of findings report that the monetary policy affects banks' lending rate in Turkey mainly through its effects on the deposit rates with a lag of 2 months. The third perspective focuses on the balance sheet channel of monetary policy transmission. The results indicate that mainly the policy rate of central bank and liquidity level affect the supply of bank loans. Each of the variables of the adequacy of bank capital and ROA affects the bank's supply of the loans. Amongst the economic variables, the GDP growth has a positive and significant and stock exchange index has negative and significant relation with the supply of bank loans.

Revisiting the bank lending channel in Turkey under the unconventional monetary policy framework

“…The study's results suggest bank lending channel is effective in the monetary transmission mechanism in Turkey during the period under investigation. Turguttopbaş (2019) investigates the transmission of monetary policy rates in Turkey considering the period 2001-2017. Ordinary Least Squares and Generalized Linear Model estimation results show that the lending rate of Turkish banks has been affected by the change in policy rate with a lag of three months, while this takes through its impacts on deposit rates within two months.…”