Abstract:

Abstract In this article, using the data of the Turkish economy for the period 2003:Q1-2019:Q4, dynamic relationship between nonperforming loans ratio (NPL) and macroeconomic variables is examined with a structural vector autoregressive model. According to the findings of impulse response analysis, increases in credit growth and real GDP growth slow down the NPL increase, while an increase in the lending interest rate accelerates the NPL increase. On the other hand, an increase in the NPL ratio creates negative feedbacks on credit growth and economic growth. In addition, while an increase in GDP growth raises credit growth, an increase in credit growth accelerates GDP growth. On the other hand, an increase in lending rate significantly reduces both credit growth and GDP growth. Therefore, while credit growth and economic growth shocks feed each other positively, a positive lending rate shock affects both credit growth and economic growth negatively. These findings point to the strong macro-financial linkages. Additionally, in the models including asset prices, it is proved that NPL, inflation rate and lending rate react positively to an increase in nominal Dollar/TL exchange rate, while credit growth reacts it negatively. It is also proved that NPL and lending rate react negatively to an increase in real BIST100 return, while credit growth and economic growth respond it positively. Furthermore, it is shown that a decrease in credit growth has a positive impact on nominal Dollar/TL rate, while a decrease in lending rate has a positive impact on real BIST100 return. These results show that movements in asset prices play an important role in emergence of the macro-financial linkages.

Keywords: