Boon or Bane? The Impact of Loan Supply and Demand Shocks on Loan Price Dispersion

Salih Zeki Atilgan, Tarik Aydogdu, Huseyin Ozturk and Muhammed Hasan Yilmaz

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

Abstract: By disentangling simultaneous supply and demand shocks in the loan market of an emerging economy, we examine how such loan shocks in the banking sector impact loan price dispersion. Our fixed effects panel estimations for the period 2012-2023 in Turkiye show that both positive credit supply and demand shocks are associated with heightened loan rate dispersion at the bank level. Our results are invariant to a number of robustness checks. In terms of a potential channel, we document that decreasing the competitive structure of the banking industry moderates the impact of credit supply shocks on interest rate dispersion. Our extended set of analyses indicates that increasing credit supply and demand shocks are associated with declining non-performing and stage 2 loan ratios, implying a lower likelihood of financial stability concerns.

Keywords: Credit supply shocks; Credit demand shocks; Credit pricing dispersion; Micro data; Panel data analysis (search for similar items in EconPapers)
JEL-codes: C33 E51 G21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2411

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