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Boon or Bane? The Impact of Loan Supply and Demand Shocks on Loan Price Dispersion

Author

Listed:
  • Salih Zeki Atilgan
  • Tarik Aydogdu
  • Huseyin Oztürk
  • Muhammed Hasan Yilmaz

Abstract

By disentangling simultaneous supply and demand shocks in the loan market of an emerging economy, we examine how such loan shocks in the banking sector impact loan price dispersion. Our fixed effects panel estimations for the period 2012-2023 in Turkiye show that both positive credit supply and demand shocks are associated with heightened loan rate dispersion at the bank level. Our results are invariant to a number of robustness checks. In terms of a potential channel, we document that decreasing the competitive structure of the banking industry moderates the impact of credit supply shocks on interest rate dispersion. Our extended set of analyses indicates that increasing credit supply and demand shocks are associated with declining non-performing and stage 2 loan ratios, implying a lower likelihood of financial stability concerns.

Suggested Citation

  • Salih Zeki Atilgan & Tarik Aydogdu & Huseyin Oztürk & Muhammed Hasan Yilmaz, 2024. "Boon or Bane? The Impact of Loan Supply and Demand Shocks on Loan Price Dispersion," Working Papers 2411, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2411
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2024/24-11
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    More about this item

    Keywords

    Credit supply shocks; Credit demand shocks; Credit pricing dispersion; Micro data; Panel data analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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