The Effect of Policy Rate and Inflation Rate on the Credit Volume: 2003-2023 The Case Of Turkiye

Abstract

In the study, the long-term relationship between policy interest, inflation and bank deposits and credit volume was analyzed using the ARDL Bounds Test method for the period 2003Q1-2023Q6 within the scope of monetary policy practices in the Turkish economy. According to the analysis results of the ARDL bounds test applied to determine the existence of a cointegrated relationship between the relevant variables; It has been determined that if the coefficients of the policy interest rate and inflation rate variables take negative values, the relevant variables adversely affect the bank loans variable, and if the coefficients of bank deposits take positive values, the relevant variable affects deposit banks loans positively, and there is a long-term cointegrated relationship between the variables. In other words, a 1% increase in bank deposits increases the loan volume by 0.94%, while a 1% increase in the inflation rate and policy interest rate reduces the loan volume by 0.75% and 0.32%, respectively. In addition, with VAR Granger causality analysis, a mutual causality relationship between banking deposits and loans was determined, and it was concluded that deposits and loans affect the inflation variable unidirectionally.