An Empirical Analysis of the Risk-Taking Channel of Monetary Policy in Turkey

Ekin Ayşe Özşuca and Elif Akbostancı

Emerging Markets Finance and Trade, 2016, vol. 52, issue 3, 589-609

Abstract: This article investigates the bank-specific characteristics of risk-taking behavior of the Turkish banking sector as well as the existence of risk-taking channel of monetary policy in Turkey. Using bank-level quarterly data over the period 2002–2012 a dynamic panel model is estimated. We find evidence that low short-term interest rates reduce the risk of outstanding loans; however short-term interest rates below a theoretical benchmark increase risk-taking of banks. This result holds for macroeconomic controls and external factors as well. Furthermore, in terms of bank-specific characteristics, our analysis suggests that large, liquid, and well-capitalized banks are less prone to risk-taking.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:52:y:2016:i:3:p:589-609

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DOI: 10.1080/1540496X.2015.1047300

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