Bank Lending in Turkey: Effects of Monetary and Fiscal Policies

Abstract

We study the impact of monetary and fiscal policies on credit growth inTurkey using bank-level data from the last quarter of 2002 to the firstquarter of 2008. We find evidence that the liquidity-constrained bankshave a sharper decline in lending during contractionary monetarypolicies and that the crowding-out effect diminishes more for banks witha retail banking focus when the government adopts fiscal discipline.However, the results are statistically weak. Hence, the evidence is notstrong enough to irrefutably document the bank lending channel and theimpact of government finances on loan supply in Turkey even though theseeffects may be operational.