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- Title
The Effects of the Banking Sector’s Credit Expansion on the Current Account in Turkey.
- Authors
Pehlivanoğlu, Ferhat; Erarslan, Cemil; Narman, Zeynep
- Abstract
The high current account deficit problem, which has been persisting for a long time in developing countries and becoming increasingly difficult to finance with national resources, leads to balance of payments crises and increases macroeconomic instability. The issue of how to reduce the high current account deficit problem, which is considered as the soft belly of the Turkish economy and which becomes unsustainable in some periods, is one of the most debated issues in the public. Expansionary monetary policies followed by central banks, which wanted to combat the negative shocks of the global debt crisis on real economic activity that broke out in 2008/2009, led to the expansion of the credit volume of the banking sector in developing countries and, accordingly, to a rapid increase in current account deficit levels through importbased growth. Purpose of the study is to analyze the effects of the credit expansion of the banking sector on the current account balance in the Turkish economy. In the study based on the 2007:Q1 and 2021:Q3 periods, first of all, ADF unit root test was applied to check the stationarity of the variables. Then, the autoregressive distributed lag (ARDL) approach was used to analyze the long-term cointegration and dynamic interactions between the variables. Finally, Toda Yamamoto causality test was applied to determine the direction of the relationship. The results show that there is a long-term relationship between the variables, and the biggest effect on the current account deficit is from development and investment loans. The results obtained from the causality analysis also show that there is a reciprocal causality relationship between current account deficits and participation bank loans and development and investment bank loans.
- Subjects
BANKING industry; DEVELOPING countries; BALANCE of payments; MACROECONOMICS; ECONOMIC development
- Publication
Turkish Studies - Economics, Finance, Politics, 2022, Vol 17, Issue 3, p797
- ISSN
2667-5625
- Publication type
Article
- DOI
10.7827/TurkishStudies.62972