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Macroeconomic shocks and Islamic bank behavior in Turkey

Ahmet Aysan, Mustafa Disli, Adam Ng () and Huseyin Ozturk

Chapter 16 in Handbook of Empirical Research on Islam and Economic Life, 2017, pp 375-394 from Edward Elgar Publishing

Abstract: Events such as the ‘credit crunch’, ‘bank run’, ‘financial contagion’, ‘flight to quality’ and ‘systemic risks’ have widely transpired in recent times. One important dimension permeating these events is the dynamic link between macroeconomic shocks and banks’ behaviour. Economic crises experienced by five East Asian countries in the late 1990s were accompanied by financial sector problems. The Great Recession of the late 2000s also corresponded to heightened solvency risks affecting over-leveraged banks and financial institutions in many developed countries. In a world of imperfect information, adverse macroeconomic shocks could weaken firms’ balance sheets, diminish bank capital and trigger financial disintermediation. Positive shocks, on the contrary, could increase firms’ net worth and prompt additional bank lending. Understanding the nature of this interaction offers regulators, supervisors, firms and households valuable insights into the process of policymaking, financial intermediation and responding to boom and bust cycles in the economy.

Keywords: Asian Studies; Economics and Finance (search for similar items in EconPapers)
Date: 2017
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