Dollarization, Pass-through, and Domestic Lending: Evidence from Turkish Banking

Mustafa Caglayan; Tho Pham; Oleksandr Talavera

doi:10.1080/1540496X.2019.1678146

Dollarization, Pass-through, and Domestic Lending: Evidence from Turkish Banking

Mustafa Caglayan, Tho Pham, Oleksandr Talavera^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

46 Downloads (Pure)

Abstract

This article examines financial dollarization in Turkish banking sector during the 2002 Q4–2018 Q4 period. We find significant currency mismatch in banks’ balance sheets: banks happen to transfer less than 30% of their foreign denominated deposits into foreign denominated credit. In addition, banks with greater currency imbalance are more likely to extend their domestic denominated currency loans. Although raising funds in foreign currency to lend in domestic currency can help banks increase their profits, this also increases banks’ exposure to exchange rate risks. Further examination shows that banks continue facing great currency risk despite hedging through off-balance transactions.

Original language	English
Pages (from-to)	3190-3201
Number of pages	12
Journal	Emerging Markets Finance and Trade
Volume	57
Issue number	11
Early online date	6 Nov 2019
DOIs	https://doi.org/10.1080/1540496X.2019.1678146
Publication status	Published - 2 Sept 2021

Keywords

commercial banks
currency mismatch
financial dollarization
G20
G21
pass-through

ASJC Scopus subject areas

Finance
Economics, Econometrics and Finance(all)

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This is an Accepted Manuscript of an article published by Taylor & Francis in Emerging Markets Finance and Trade on 6/11/2019, available online: http://www.tandfonline.com/10.1080/1540496X.2019.1678146
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title = "Dollarization, Pass-through, and Domestic Lending: Evidence from Turkish Banking",

abstract = "This article examines financial dollarization in Turkish banking sector during the 2002 Q4–2018 Q4 period. We find significant currency mismatch in banks{\textquoteright} balance sheets: banks happen to transfer less than 30% of their foreign denominated deposits into foreign denominated credit. In addition, banks with greater currency imbalance are more likely to extend their domestic denominated currency loans. Although raising funds in foreign currency to lend in domestic currency can help banks increase their profits, this also increases banks{\textquoteright} exposure to exchange rate risks. Further examination shows that banks continue facing great currency risk despite hedging through off-balance transactions.",

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Dollarization, Pass-through, and Domestic Lending: Evidence from Turkish Banking

Abstract

Keywords

ASJC Scopus subject areas

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