The Making of the Turkish Financial Crisis

Akyüz, Yılmaz; Boratav, Korkut

doi:10.1016/s0305-750x(03)00108-6

Cited by 208 publications

(128 citation statements)

References 10 publications

Supporting

Mentioning

117

Contrasting

Unclassified

Order By: Relevance

“…The mismanagement of the priorities of macroeconomic adjustment programs, such as the one designed by the IMF in 1999 prevented the market from being disciplinary toward banks. Akyuz and Boratav (2003) state that ''A better diagnosis of the conditions in the Turkish banking system together with a proper understanding of the dynamics of the exchange rate-based stabilization programs could have alerted policymakers to the risks entailed by a rapid decline in interest rates as well as to the vulnerability of the economy to boom-bust cycles in capital flows. .…”

Section: Resultsmentioning

confidence: 99%

“…These reforms resulted in fierce competition in the banking sector and high interest rates. Furthermore, the emergence of money brokers called ''bankers'' caused interest rates on savings to increase significantly via Ponzi financing methods (see, for example, Akyuz & Boratav, 2003). However, the financial distress in the real sector and unhealthy competition in banking resulted in the failure of six banks in total during 1983-84.…”

Section: Background (A) the Banking Sector In Turkeymentioning

confidence: 99%

“…In addition to the weak implementation of the regulations, for various reasons (including political interventions until 1999), the IMF's new structural reform program ignored the fragility of the financial markets and institutions and caused further loss of confidence in the banking sector. In particular, due to the IMF's design failure, the Central Bank's ability to implement implicit mechanisms such as ''lender of last resort'' in addition to the fiscal authorities' use of their traditional tools of austerity made the economy powerless against speculative attacks (see Akyuz & Boratav, 2003;Alper & Onis, 2002;Cizre & Yeldan, 2005). Considering all, in this paper, we argue that in quite a lax regulatory environment, the marketdepositors and borrowers-might have an incentive to protect their stakes from various risks in the banking system.…”

Section: Background (A) the Banking Sector In Turkeymentioning

confidence: 99%

See 2 more Smart Citations

Market Reaction to Risky Banks: Did Generous Deposit Guarantee Change It?

Önder

Ozyildirim

2008

World Development

View full text Add to dashboard Cite

Summary. -Turkey experienced a massive banking crisis in February 2001, resulting in the loss of more than a thousand managerial jobs and the closure of 21% of all bank branches in the market. In this paper, we study the behavior of the market and the banks in Turkey before the crisis, from 1988 to 2000, which includes the period of full deposit insurance. The empirical results showed that not only depositors but also borrowers reacted negatively to risky banks and punished them even more during the period of generous government guarantee. However, in the same period, banks were found to increase their moral hazard behavior significantly. Although the International Monetary Fund and the World Bank recommend explicit deposit insurance for developing countries, the findings of this paper suggest that deposit insurance may not be an effective policy tool to improve market confidence, and it does not guarantee a stable economic environment even when the market reacts negatively to the moral hazard behavior of banks.

show abstract

Section: Resultsmentioning

confidence: 99%

Section: Background (A) the Banking Sector In Turkeymentioning

confidence: 99%

Section: Background (A) the Banking Sector In Turkeymentioning

confidence: 99%

See 1 more Smart Citation

Market Reaction to Risky Banks: Did Generous Deposit Guarantee Change It?

Önder

Ozyildirim

2008

World Development

View full text Add to dashboard Cite

show abstract

“…Here we have included Central European (CE) countries such as the Czech Republic, Hungary, Poland, as well as Russia (Gabor, 2012) and Turkey (Akyüz & Boratav, 2005;Karacimen, 2014). The three former economies together with Russia are collectively referred to as the Central Eastern European (CEE) countries in our sample.…”

Section: Financialisation Indicators: Sample Countries and Data Sourcesmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

126

View full text Add to dashboard Cite

Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bankbased to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.Keywords: Financialisation; Emerging markets; Financial instability; Asset price volatility; Heterodox economics JEL codes: F30; F34; G01; G12; G15; B50 Acknowledgements: We would like to thank our colleague Rex McKenzie for comments on the paper. The usual disclaimers apply.

show abstract

“…Because of the massive capital outflows, the overnight interest rates skyrocketed on February 21 and the Central Bank had no choice but to abandon the peg. We refer to Akyüz and Boratav (2003) for a detailed discussion about the development of the Turkish banking sector during the crisis. siphoned off over $1 billion to its parent holding company (The Economist 2001).…”

Section: Turkish Dual-banking System and Deposit Insurance Reformmentioning

confidence: 99%

Islamic Banks, Deposit Insurance Reform, and Market Discipline: Evidence from a Natural Framework

et al. 2016

View full text Add to dashboard Cite

Although it has been intensively claimed that Islamic banks are more subject to market discipline, the empirical literature is surprisingly mute on this topic. To fill this gap and to verify the conjecture that Islamic bank depositors are indeed able to monitor and discipline their banks, we use Turkey as a test setting. The theory of market discipline predicts that when excessive risk taking occurs, depositors will ask higher returns on their deposits or withdraw their funds. We look at the effect of the deposit insurance reform in which the dual deposit insurance was revised and all banks were put under the same deposit insurance company in December 2005. This gives us a natural experiment in which the effect of the reform can be compared for the treatment group (i.e., Islamic banks) and control group (i.e., conventional banks). We find that the deposit insurance reform has increased market discipline in the Turkish Islamic banking sector. This reform may have upset the sensitivities of the religiously inspired depositors, and perhaps more importantly it might have terminated the existing mutual supervision and support among Islamic banks.JEL codes: G23, G28, O52

show abstract

The Making of the Turkish Financial Crisis

Cited by 208 publications

References 10 publications

Market Reaction to Risky Banks: Did Generous Deposit Guarantee Change It?

Market Reaction to Risky Banks: Did Generous Deposit Guarantee Change It?

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Islamic Banks, Deposit Insurance Reform, and Market Discipline: Evidence from a Natural Framework

Contact Info

Product

Resources

About