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Do Credits Affect Money Supply and Deposits, or Vice Versa, or Interconnected?

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  • Goksel TIRYAKI
  • Mubariz HASANOV

Abstract

There are different approaches regarding the effect of credits on deposits and money supply. In particular, the view that banks do not need deposits to create credit has become increasingly popular. In this paper we empirically investigate the relationship among money supply, credits and deposits based on the Turkish experience. Specifically, using quarterly observations on M1, M2, M3, deposits in Turkish Lira (TL-Lira) and Foreign Currency (FX) deposits as well as credits spanning the December 2005 - September 2021 period we find that credits have significant effects on money stock and deposits. However, our results also suggest that credits are not the most important determinant of money supply or deposits. While our results suggest that credits may generate money and deposits endogenously, this finding does not imply that money is purely an endogenous variable.

Suggested Citation

  • Goksel TIRYAKI & Mubariz HASANOV, 2022. "Do Credits Affect Money Supply and Deposits, or Vice Versa, or Interconnected?," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 16(2), pages 217-245.
    • Handle: RePEc:bdd:journl:v:16:y:2022:i:2:p:217-245
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Credit; Deposit; Money Supply; Loan Creation; Deposit Creation.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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