Interactions between bank behavior and financial structure: evidence from a developing country

Ozan Bakis, Fatih Karanfil () and Sezgin Polat
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Fatih Karanfil: Galatasaray University Economic Research Center

No 12-1, GIAM Working Papers from Galatasaray University Economic Research Center

Abstract: We use time-series analysis to examine bank behavior with respect to credit supply employing both banking data and other financial variables for the Turkish economy over the 1990 – 2009 period. We provide a vector error-correction (VEC) model to test for multivariate cointegration and Granger causality. More specifically, this paper seeks to fill the gap on how the bank behavior interacts with the financial structure given the conditions of macroeconomic policy. Our findings suggest that Granger causality is present between credit-deposit ratio and maturity of time deposits which implies that depositor decision on maturity changes the composition of balance sheet of banks leading to low credit creation. This result implies that macroeconomic uncertainty and instability lead to a kind of credit contraction with the decrease of deposit maturity. Our results also reveal that economic cycles are credit-driven in Turkey.

Keywords: Credit-deposit ratio; deposit maturity; Granger causality (search for similar items in EconPapers)
JEL-codes: C32 E50 G21 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012-03-21
New Economics Papers: this item is included in nep-ara, nep-ban and nep-cwa
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Persistent link: https://EconPapers.repec.org/RePEc:ris:giamwp:2012_001

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