Synchronization, Concordance and Similarity between Business and Credit Cycles: Evidence from Turkish Banking Sector

Mehmet Selman Colak, Abdullah Kazdal and Muhammed Hasan Yilmaz

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

Abstract: In this study, we provide a comprehensive quantification of the co-movement between credit and business cycles in the Turkish case for the period 2007-2020. To this end, we construct synchronization, concordance and similarity index, which aim to measure the time-varying degree of coherence between credit and output dynamics. In specific, these indices are designed to capture the location, momentum and size aspects of the cyclical correlation respectively. Our empirical analysis also covers the cyclical association of 13 different loan sub-categories with the course of the output gap by employing disaggregated data. Overall, index results show that credit-output nexus in the Turkish case present heterogeneities across loan types, sample episodes and cyclical characteristics (location, momentum, and size). We also examine the impact of local and global macroeconomic and financial factors on cyclical coherence by utilizing Tobit regressions. The empirical results indicate that movements in local financial conditions, fluctuations in macroeconomic volatilities, and the course of capital flows are influential determinants of cyclical co-movements.

Keywords: Credit cycle; Business cycle; Synchronization; Filtering; Tobit regression (search for similar items in EconPapers)
JEL-codes: C35 C38 E32 G21 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ara, nep-ban, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2011

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