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Original Article

Ekonomik Yaklasim. 2007; 18(63): 29-54


EXISTENCE OF BANK CAPITAL CHANNEL: AN ANALYSIS FOR THE TURKISH BANKING SECTOR

Süleyman DEĞİRMEN, Filiz ÖZAĞ.

Abstract
Traditional monetary theory has largely ignored the role of bank capital. The 'bank lending channel' thesis maintains that monetary policy actions can also alter the supply of bank loans by changing bank reserves. However, financial regulations on bank capital along with other interventions should be considered to fill the gap between traditional monetary theory and bank lending channel.Therefore, the paper analyzes the different responses of the capital-asset ratio and growth rate of loan of banks, classified in three categories, in the commercial banking group to selected macroeconomic variables such as exchange, interest, and public sector domestic debt stock. Based on the some empirical evidences and the results of the impulse response function, for 1992.04-2005.03, the paper has several implications. First, bank capital channel that explains a link between capital and loans structure is that monetary policy actions can affect the supply of bank loans through their impact on bank capital. Second, the strength of this channel depends on the capital adequacy ratio of banks in each category. In particular, lending by banks with different level of capital adequacy ratios will have different reactions to shocks to the variables.

Key words: Government and Monetary System, Financial Markets and Macroeconomy, Central Bank, Bank Capital Channel, Turkish Banking Sector



Article Language: Turkish English



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