Consumer Loans and Credit Cards in an Emerging Market: Econometric Modelling and Policy Implications for Turkey

Abstract

Since it has important implications in many economic sectors (e.g. construction, car, retail, real estate), analysis of the growth in consumer loans and credit cards (CLCC), which has been witnessed in recent years in Turkey, is particularly important. Our objective is to develop an understanding of the recent growth in CLCC, investigate the causality relationship with other macroeconomic variables and how CLCC responds to the shocks given to other variables and determine the impact of each variable on the variance of CLCC. In this article, we determine the relationships between CLCC and chosen macroeconomic variables and make suggestions about which policy tools should be used to influence, and if necessary to manage, the growth in CLCC. For this purpose, we use monthly data for the period of January 2004-December 2013 of seven macroeconomic variables on money supply, interest rate, income, consumer confidence, inflation, stock market and consumer goods imports. First, we employ the Granger Causality Test to identify the causality relationships between variables. Second, we analyse the variables using a VAR based Impulse-Response and Variance Decomposition Analyses. We found that money supply and interest rates have significant potential as a monetary policy tool and that stock market, consumer confidence, income and import variables had some potential to be used to predict the growth in CLCC.