Capital inflows and banking in the Turkish economy

Abstract

We examine the developments in the Turkish banking industry in the context of capital and financial inflows specifically focusing on cross-border banking liability. First, we analyse how the Turkish economy, as an emerging market, has been affected by capital and financial inflows. Against this backdrop, we describe the transformation of the Turkish banking sector, paying special attention to the post-2001 period. In particular, we also investigate the impact of cross-border liability on the performance of Turkish banks. Finally, we evaluate the current outlook of the Turkish banking sector and offer some policy recommendations.