Consumer loan rate dispersion and the role of competition: Evidence from Turkish banking industry

Selva Bahar Baziki, Yavuz Kiliç and Muhammed Hasan Yilmaz

Central Bank Review, 2022, vol. 22, issue 1, 27-47

Abstract: This paper investigates the degree of dispersion in the loan pricing of commercial banks and its association with competitive conditions in the banking industry of a large emerging economy. To quantify the lending rate variability in consumer loans, we utilize a new indexation mechanism exploiting a detailed bank-level dataset for the period January 2007–April 2020. With panel convergence methods, we show the existence of heterogeneity in long-term co-movements among banks' loan pricing, while periods following the tightening in financial conditions display short-term deviations from general tendencies as demonstrated by dispersion indices. Our empirical design also entails the construction of competition indicators for aggregated and consumer segment-based credit market developments. Quantile regression results validate that the improvements in industry competition are related to the lower level of lending rate dispersion in housing and vehicle segments in a statistically significant manner, whereas an opposite relationship is evident for general-purpose loans.

Keywords: Loan rate dispersion; Competition; Log-t convergence test; Quantile regression (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:cebare:v:22:y:2022:i:1:p:27-47

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