The Determinants of Credit Dolarization: Turkish Case
Abstract
The aim of this study is to determine the factors which cause credit dollarization phenomenon in Turkish banking sector. For this purpose, monthly data for January 2006 - January 2019 are used in the econometric estimations. Variables selected as determinants of credit dollarization are liability dollarization, deposit dollarization, inflation rate, real exchange rate, loan interest rate and leverage ratio. The relationship between these variables and credit dollarization was tested by Vector Error Correction Model (VECM) and the factors affecting credit dollarization were determined. The econometric test results show that the credit dollarization phenomenon affected positively from the increase in dollarization in terms of deposits and liabilities, the inflation rate, the increase in commercial loans interest rate of Turkish Lira and the increase in leverage ratio, however, the increase in the exchange rate affected credit dollarization negatively. The results indicate that credit dollarization phenomenon in the banking sector is affected by both macroeconomic indicators and sector dynamics.
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