Leading Indicators of Turkey’s Financial Crises

Mohamad Kaakeh () and Korhan K. Gökmenoğlu
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Mohamad Kaakeh: Eastern Mediterranean University
Korhan K. Gökmenoğlu: Eastern Mediterranean University

A chapter in New Dynamics in Banking and Finance, 2022, pp 15-44 from Springer

Abstract: Abstract This paper empirically investigates the leading indicators of the 1994, 2000/2001, and 2009 Turkish financial crises by applying stepwise regression and probit and logit models to three sets of quarterly data. Empirical findings show that although there are a common set of leading indicators, including current account balance, domestic debt, exports, external debt, and real effective exchange rate, the three crises in Turkey are different in structure, and each has different characteristics with different leading indicators due to changes in the nature of the Turkish economy. Our findings indicate that at the current state of the Turkish economy, several fundamental macroeconomic variables, banking sector stability, and global economic developments are the main leading indicators for the crisis. Policymakers could minimize the risk of financial crises by imposing tighter regulations on banks to avoid default and credit risk, following liquidity levels in the markets, and closely following the stability of global economic indicators.

Keywords: Financial crisis; Banking sector; Stepwise regression; Probit and logit models; Leading indicators; Turkey (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-93725-6_2

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DOI: 10.1007/978-3-030-93725-6_2

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