The aim of this paper is to investigate the impact of banks’ sovereign debt exposures on the financial development of Turkey. Results of the bounds test reveal a long-run and negative equilibrium relationship between banks’ domestic claims on sovereign and financial development, while Granger causality tests display a unidirectional causation from domestic debt to financial depth. Furthermore, stochastic frontier estimations provide evidence for the existence of cost inefficiency channel from government debt portfolios to financial development. The results suggest a need for more conscientious fiscal policy and country specific prudential regulation design for the financial development of Turkey.
Abbas, A. — Christensen, J. (2010): The Role of Domestic Debt Markets in Economic Growth: An Empirical Investigation for Low-income Countries and Emerging Markets. IMFS Staff Papers, 57(1), Washington, D.C.
Aizenmen, J. — Noy, I. (2003): Endogenous Financial Openness: Efficiency and Political Economy Considerations. NBER Working Paper, 10144, Cambridge, MA.
Aizenman, J. — Pinto, B. — Radziwill, A. (2007): Sources for Financing Domestic Capital — Is Foreign Saving a Viable Option for Developing Countries? Journal of International Money and Finance, 26(5): 682–702.
Radziwill A., 'Sources for Financing Domestic Capital — Is Foreign Saving a Viable Option for Developing Countries?' (2007) 26Journal of International Money and Finance: 682-702.
Radziwill A.Sources for Financing Domestic Capital — Is Foreign Saving a Viable Option for Developing Countries?Journal of International Money and Finance200726682702)| false
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2021 Volume 71
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