Non-core Liabilities and Credit Growth

Zubeyir Kilinc (), Hatice Karasoy Can and Mustafa Yücel

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: The composition of bank liabilities has captured a lot of attention especially after the global financial crisis. It is argued that movements particularly in the non-core liabilities may reflect the stage of financial cycle. The literature claims that banks usually fund their credits with core liabilities, which grow with households� wealth, but when there is a faster growth in credits compared to deposits, the banks resort to non-core liabilities to meet the excess demand. Despite this significant role assumed to be played by the non-core liabilities, there are not too many country-specific studies on this issue. This study analyzes the relationship between the non-core liabilities and credits within a small open economy, namely Turkey. It investigates the relationship under alternative settings and reveals a robust relationship between credits and non-core liabilities under all frameworks. The study also verifies that elevated demand for credit may induce some increase in the non-core liabilities. Finally, the relationship is affirmed in the long-run.

Keywords: Core Liabilities; Non-core Liabilities; Credits; Small Open Economy; VAR; VECM (search for similar items in EconPapers)
JEL-codes: E44 E51 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ara, nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1324

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