CAUSALITIES BETWEEN COMMERCIAL BANK CREDITS AND NON-PERFORMING LOANS IN TURKEY

Abstract

In the study, analyzes the reciprocal interactions between the non-performing loans and credit-to-GDP gap in Turkish commercial banking sector. The analysis is based on a panel data set of 27 banks that actively lend commercial credits to the quarterly data for the period 2006: 4 to 2016: 3. Panel causality tests were used as an analysis method. The findings have shown that there are strong interactions between the credit-to-GDP gap and the nonperforming loans, which banks are considered to reflect current credit risks. Since the credit-to-GDP gap is regarded as a leading indicator of systemic bank crises, the mentioned interactions support the argument that the nonperforming loans are a significant dynamic of possible bank crises.