Original scientific paper
https://doi.org/10.1080/1331677X.2018.1552174
Asymmetric effects of central bank funding on commercial banking sector behaviour
Afsin Sahin
; Department of Banking, School of Banking and Insurance, Ankara Haci Bayram Veli University, Ankara, Turkey
M. Hakan Berument
; Department of Economics, Bilkent University, Ankara, Turkey
Abstract
In this paper, we assess the effects of Central Bank Funding (C.B.F.) on commercial bank lending behaviour by using weekly Turkish data from 7 January 2011 to 5 June 2015. To be specific, using the Nonlinear Autoregressive Distributed Lag Error Correction Model, we assess the effects of C.B.F. provided daily by the Central Bank of the Republic of Turkey through Open Market Operations to financial markets. Our empirical evidence reveals that for all types of lending, an increase in C.B.F. (which has a higher cost for commercial banks relative to alternatives) forces commercial banks to borrow from higher-cost channels, i.e., we find that increasing C.B.F. discourages commercial bank lending. We also find that decreases in C.B.F. that proxy what commercial banks can borrow more cheaply from alternative sources increase commercial bank lending. However, increasing C.B.F. is more effect- ive than decreasing C.B.F. for Total Bank Loans, Total Credit Cards and Automobile Loans, and decreasing C.B.F. is more effective in the short run for Consumption Loans, Housing Loans and Commercial Loans:short-run asymmetry. Therefore, we can report only limited support forlong-run asymmetry, and consequently, claim that there ismagnitude(an increase versus decrease in C.B.F.) andcategory asymmetry(across different lending categories).
Keywords
Monetary policy; central banking; central bank funding; NARDL-ECM
Hrčak ID:
228552
URI
Publication date:
22.1.2019.
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