Is There a Financial Accelerator Mechanism in the Turkish Banking Industry?

Ekin Ayse Ozsuca
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Ekin Ayse Ozsuca: Cankaya University

Business and Economics Research Journal, 2018, vol. 9, issue 4, 787-798

Abstract: This paper empirically investigates the cyclical behavior of price-cost margins for Turkish banks over the 2002q1-2017q3 period by exploiting dynamic panel data modeling approaches. The estimation results indicate that margins behave countercyclically during economic fluctuations. It appears that Turkish banks’ price-cost margins tend to stay high acting countercyclical during economic downturns, which may limit the supply of loans and thereby, cause a further reduction in production, deepening the contraction. Specifically, several bank-specific characteristics, that is; banks’ liquidity, capitalization and size, together with the monetary policy and market concentration in the banking industry are found to be crucial in explaining the countercyclical behavior of net interest margins in Turkey. Furthermore, the recent global financial crisis in the late 2008 seems to have a considerable effect on the banks margins as well. Overall, these findings provide evidence for the existence of “financial accelerator” at work in the Turkish economy during the period under investigation.

Keywords: Price-Cost Margins; Business Cycles; Financial Accelerator; Turkish Banking Industry; Dynamic Panel Data (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0359

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