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    Does Exchange Rate Volatility Affect the Bank Lending Channel?
    (İstanbul Üniversitesi, 16.08.2024) Buyun, Burak
    The bank lending channel is one of the most debated channels of the transmission mechanism, especially in Turkey. According to many studies, exchange rate volatility is a good indicator of macroeconomic, financial and political instability. This study tests whether the bank lending channel is affected by exchange rate volatility in Turkey. Thus, we aim to obtain an important finding on why the bank lending channel works weakly in Turkey. To test this hypothesis, the Vector Auto Regression (VAR) model is used for the period January 2011- September 2023. Evidence from the impulse response function suggests that exchange rate volatility has a negative impact on loans, while variance decomposition results show that exchange rate volatility has a high power to explain the change in loans. Credit may not always respond to expansionary (contractionary) monetary policy in an increasing (decreasing) direction. In periods of high exchange rate volatility (political, financial, macroeconomic instability), banks may not increase lending even in a low interest rate environment. This is because when exchange rate volatility is high, banks avoid taking risks under uncertainty. Therefore, for the bank lending channel to work more effectively, macroeconomic, financial and political stability should be ensured in addition to monetary policy.
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    Does monetary policy affect automotive demand? An empirical example from Turkey
    (Seyfettin Erdoğan, 30 Haziran 2024) Ustabaş, Ayfer; Buyun, Burak
    The automotive sector makes a significant contribution to economic growth both as an important component of consumer spending and as the main buyer of many supplier sectors. In Turkey, which is one of the countries where this contribution is high, it is thought that the motive of holding wealth and speculation is also effective in the automotive demand of economic agents, especially in recent years. In addition, monetary policy actions to control inflation are also expected to indirectly affect the performance of the automotive sector. There is a substantial literature examining the effects of monetary policy on the automotive demand in industrialized countries. Nevertheless, such studies are quite scarce in emerging countries that are both important automotive producers and have been struggling with high inflation especially in recent years. To fill this gap in the literature, the main objective of this study is to investigate whether monetary policy decisions and domestic automotive demand are related or not in Turkey. The effect of monetary policy on domestic automotive sales in Turkey is tested with the Autoregressive Distributed Lag (ARDL) model. Covering the period of January 2011- December 2023, the study analyzes the weighted average funding cost (WAFC) as a monetary policy variable. The findings of the study suggest that WAFC has a direct effect on domestic automotive sales both in the short run and in the long run. In addition, it was concluded that tight monetary policy reduced automotive sales both in the long run and in the short run. These results support the proposition that monetary policy is an effective tool for policymakers and the real sector to sustain and support the growth of the automotive sector.