Bank lending channel under high policy rate volatility: evidence from Turkiye

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dc.contributor.authorUfuk Can
dc.contributor.authorTuralay Kenc
dc.contributor.authorEmrah Ismail Cevik
dc.date.accessioned2025-12-23T02:47:37Z
dc.date.available2025-12-23T02:47:37Z
dc.date.issued2025
dc.description.abstractThis paper investigates the transmission mechanisms of high policy rate volatility episodes in Turkiye, characterized by sharp and unpredictable interest rate fluctuations. Focusing on the bank lending channel, we employ a time-varying parameter structural vector autoregression with stochastic volatility model to analyze the evolving impact of monetary policy on bank lending. Our analysis examines several key aspects: the relative effectiveness of a single, large policy rate change compared to a series of gradual adjustments; the potential non-linearity of transmission, investigating whether tight or lax monetary policy exhibits greater effectiveness; and the differential responses of rate-based conventional banks and profit-loss-sharing Islamic banks to monetary policy shocks. The key findings indicate that the effectiveness of the bank lending channel varies with the nature and magnitude of monetary policy shocks. Notably, episodes of substantial monetary tightening, especially when coupled with significant exchange rate depreciation, exert a more pronounced dampening effect on lending activity. Furthermore, Islamic banks are more sensitive to policy shocks, largely because of their distinct reliance on profit-sharing arrangements and liquidity-dependent funding models.en_US
dc.identifier.citationCan, U., Kenc, T., & Cevik, E. I. (2025). Bank lending channel under high policy rate volatility: Evidence from Turkiye. The Quarterly Review of Economics and Finance, Article 102058. https://doi.org/10.1016/j.qref.2025.102058en_US
dc.identifier.doihttps://doi.org/10.1016/j.qref.2025.102058
dc.identifier.issn1062-9769
dc.identifier.urihttps://ikr.inceif.edu.my/handle/INCEIF/4258
dc.languageEnglish
dc.language.isoengen_US
dc.publisherElsevier Inc.en_US
dc.rights�2025. Board of Trustees of the University of Illinois
dc.sourceSEDONA
dc.subjectBank lending channelen_US
dc.subjectDual banking systemen_US
dc.subjectHigh policy rate volatilityen_US
dc.subjectTurkish monetary policyen_US
dc.titleBank lending channel under high policy rate volatility: evidence from Turkiyeen_US
ikr.doctypeScholarly Works
ikr.topic.maintopicConventional financeen_US
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