The Turkish Banking System, Financial Crises and the IMF in the Age of Capital Account Liberalization: A Political Economy Perspective

Abstract

Recent episodes of financial crises in emerging markets progressively highlighted the importance of a sound and well-functioning banking sector for macroeconomic stability and sustainable economic growth. The Asian crisis of 1997, in particular, drew attention to the fundamental role that a deficient banking system could play in terms of generating major financial crises with devastating repercussions on the real economy and with significant possibilities of contagion in an emerging market context. The recent twin economic crises experienced by Turkey in 2000 and 2001 illustrated in a rather dramatic fashion the strong correspondence between a poorly functioning and under-regulated banking system, on the one hand, and the sudden outbreak of macroeconomic crises on the other. Indeed, the Turkish experience shows that both public and private banks can contribute significantly to the outbreak of economic crises. In retrospect, it may be argued that private commercial banks played an instrumental role in the first of the twin crises experienced in November 2000, whilst, public banks emerged as the central actors in the context of the subsequent crisis of February 2001.

How Do Individuals Choose Banks? An Application to Household Level Data from Turkey

“…7 Thus, the coefficients in this table show how a small change in one independent variable affects the probability of choosing each alternative. Column [1] in the table corresponds to public banks, columns [2] and [3] correspond to large private banks and small private banks, respectively.…”

“…[1], [2], and [3] denote public, large private, and small private banks, respectively. Standard errors in parentheses.…”

“…2 As Alper and Onis (2004) point out, the 2001 crisis in Turkey, in which both public and private banks played an active role, is an example of a combination of a weakly supervised and under-regulated banking system and a sudden macroeconomic crisis. 3 They state that in Turkey, similar to other emerging market economies like Mexico or Argentina, a transitional financial system is observed, the key feature of which is the lack of sound regulations and institutions.…”

Role of Bank Credit on Local Growth: Do Politics and Crisis Matter?

“…Turkey is an interesting country in which to analyze the association between lending by these banks and local growth in crisis and election periods. First, over the sample period, the Turkish economy was hit by three crises, and state-owned banks are considered to be among the prime contributors to one of these crises (Steinherr et al, 2004;Alper and Onis, 2004). Second, these banks are the main providers of access to financing in the lagging areas of Turkey.…”

Temporary Star or Emerging Tiger? Turkey's Recent Economic Performance in a Global Setting

“…For an overview of the Argentine Telecom experience, see Luigi Manzetti (2000). 16 For an evaluation of the Turkish banking system in the 1990s with an emphasis on the lack of regulation and the role of the IMF in the reform process, see Alper & Öniş (2004). For a much more recent assessment of banking system reforms including their nature and limitations, see Bakır & Öniş (2008).…”