Effectiveness of monetary and macroprudential shocks on consumer credit growth and volatility in Turkey

Meltem Chadwick

Central Bank Review, 2018, vol. 18, issue 2, 69-83

Abstract: This paper proposes a panel VAR model to uncover the effect of monetary policy and macroprudential tightening probability on general purpose loans, housing loans, vehicle loans, credit cards and their respective volatilities in Turkey. To conduct our analysis, first, we compare a number of stochastic volatility models using our loan and credit card series in a formal Bayesian model comparison exercise, in order to determine the best volatility model for our series. Second we disclose the latent probability of macroprudential tightening from the binary information of policy episodes, using an instrumental variable probit model estimated by conditional maximum likelihood with heteroscedasticity robust standard errors. Lastly we estimate the dynamic impact of monetary policy and macroprudential measures using a panel VAR, incorporating the latent probability of tightening episodes, credit growth, industrial production growth, loan rates, inflation and credit growth volatilities into the endogenous system of equations. We conclude that macroprudential tightening is effective in dampening credit growth, credit growth volatility and reducing consumer price inflation. Besides, this effect is more prominent when macroprudential tools are administered in coordination with monetary policy.

Keywords: Consumer loans; Monetary policy; Macroprudential policy; Stochastic volatility models; Credit growth volatility; IV probit model; Panel VAR model (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.sciencedirect.com/journal/central-bank-review/vol/18/issue/2 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcb:cebare:v:18:y:2018:i:2:p:69-83

Access Statistics for this article

More articles in Central Bank Review from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by () and () and () and ().