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Synchronization, Concordance and Similarity between Business and Credit Cycles: Evidence from Turkish Banking Sector

Author

Listed:
  • Mehmet Selman Colak
  • Abdullah Kazdal
  • Muhammed Hasan Yilmaz

Abstract

In this study, we provide a comprehensive quantification of the co-movement between credit and business cycles in the Turkish case for the period 2007-2020. To this end, we construct synchronization, concordance and similarity index, which aim to measure the time-varying degree of coherence between credit and output dynamics. In specific, these indices are designed to capture the location, momentum and size aspects of the cyclical correlation respectively. Our empirical analysis also covers the cyclical association of 13 different loan sub-categories with the course of the output gap by employing disaggregated data. Overall, index results show that credit-output nexus in the Turkish case present heterogeneities across loan types, sample episodes and cyclical characteristics (location, momentum, and size). We also examine the impact of local and global macroeconomic and financial factors on cyclical coherence by utilizing Tobit regressions. The empirical results indicate that movements in local financial conditions, fluctuations in macroeconomic volatilities, and the course of capital flows are influential determinants of cyclical co-movements.

Suggested Citation

  • Mehmet Selman Colak & Abdullah Kazdal & Muhammed Hasan Yilmaz, 2020. "Synchronization, Concordance and Similarity between Business and Credit Cycles: Evidence from Turkish Banking Sector," Working Papers 2011, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2011
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2020/20-11
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    More about this item

    Keywords

    Credit cycle; Business cycle; Synchronization; Filtering; Tobit regression;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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