External Financial Stress and External Financing Vulnerability in Turkey: Some Policy Implications for Financial Stability

Etkin Ozen, Cem Sahin and Ibrahim Unalmis

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: External financial stress is one of the causes of capital outflows and reduction in borrowing ability of emerging markets. Sudden reversal of capital inflows and disruption in access to the international capital markets could be a threat for the domestic financial stability as in the case of Asian Crisis in 1997-1998. This paper analyses the behavior of external financing sources of Turkey, namely FX non-core liabilities of the banking system and portfolio flows, for periods 1995-2000 and 2004-2012. Our results show that unlike the 1995-2000 period, FX non-core liabilities of the banking system are very sensitive to the external financial stress during the 2004-2012 period. Portfolio flows decline in both cases but with a higher magnitude in the second period. Our results have important policy implications.

Keywords: Financial stability; financial flows; FX non-core liabilities; VIX; Turkish banking secto (search for similar items in EconPapers)
JEL-codes: F21 F41 G21 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ara
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Citations: View citations in EconPapers (3)

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Journal Article: External Financial Stress and External Financing Vulnerability in Turkey: Some Policy Implications for Financial Stability (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1317

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