Is there a risk taking channel of monetary policy in Turkey?
Adanur Aklan, Nejla
Kanalıcı Akay, Hülya
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This paper uses data of the Turkish banking sector to investigate whether the stance of monetary policy has an impact on the level of risk of individual bank loans. Using bank level quarterly data over the period 2003q1-2012q3 a dynamic panel data model is estimated. There is a positive relationship between the changes in shortterm interest rates and banks risk taking. This result reflects that a decrease in short term interest rates has a positive impact on the loan portfolio via outstanding loans. However, negative relationship was found between the interest rate falling below benchmark rate and the risk taking by banks. The magnitude of this effect decreases in the large scale and high liquidity level of the banks. According to these results, it was concluded that low interest rates in Turkish banking system affects risk taking of the banks in the period of 2003q1-2012q3. These results are important for developing and conducting monetary policy. This study adds to the literature on risk-taking channel by providing evidence from an emerging market. Moreover, benchmark rate obtained by estimating Taylor rule for the above-mentioned period.